Opinion
No. CV 04 0185580 S X02
December 7, 2007
MEMORANDUM OF DECISION
RE PLAINTIFFS' MOTION FOR ORDER OF DISTRIBUTION PLAINTIFFS' MOTION FOR AN AWARD OF ATTORNEY FEES AND REIMBURSEMENT OF EXPENSES
I. BACKGROUND
The above-entitled action, brought initially by the Towns of New Hartford and Barkhamsted, and in which the Town of West Hartford and the City of Waterbury have subsequently appeared, was commenced in December 2003. As set forth in their Complaint (as amended), plaintiffs sought to bar defendant Connecticut Resources Recovery Authority (hereinafter referred to as "CRRA") from imposing Enron-transaction and other related costs and losses on the Mid-Connecticut (hereinafter referred to as Mid-Conn) Project municipalities and restitution of such costs and losses imposed to date.
The action was certified as a class action on behalf of all seventy Mid-Conn Project municipalities by order of the Court on March 21, 2006. The action was tried to the Court beginning in November 2006 continuing through January 2007, and resuming again in September 2007.
On June 19, 2007, this Court rendered a Memorandum of Decision enjoining CRRA from imposing Enron-transaction related costs on the Mid-Conn Project municipalities and ordering establishment of a constructive trust in the amount of $35,873,732.25 over Enron-transaction related litigation recoveries by CRRA to provide restitution to the Mid-Conn municipalities for their losses through the time of trial.
On October 25, 2007, the Court rendered a second Memorandum of Decision ordering CRRA to make adjustments to the FY 2008 Mid-Conn Project budget reducing the amount to be paid in service fees ("tip fees") by $6,995,200 and to reduce the tip fee charged to the Mid-Conn Project municipalities in FY 2008 accordingly.
CRRA has appealed to the Connecticut Supreme Court from the June 19, 2007 and the October 25, 2007 decisions.
On July 24, 2007, this Court denied CRRA's Application for Stay of the June 19, 2007 decision. On September 26, 2007, the Connecticut Supreme Court upheld the denial of the stay. On November 6, 2007, the Connecticut Supreme Court (en banc) affirmed the denial of the stay.
On November 16, 2007, plaintiffs filed the instant Motion for Order of Distribution of the funds in the constructive trust. Plaintiffs seek approval of a pro rata allocation of the funds based on the tonnage each Project municipality has delivered to CRRA annually.
On November 19, 2007, the Court entered an agreed Order, directing plaintiffs' counsel to provide the members of the plaintiff class with notice that a hearing on plaintiffs' Motion for Order of Distribution would be held on November 30, 2007. The notice apprised the class members of the orders being sought at the hearing, including the proposed plan of allocation, which is attached hereto as Court Appendix 1. The Notice advised each member of its right to opt out of the class, to reject the benefits of the June 19, 2007 decision, and to object or otherwise be heard with respect to plaintiffs' motion. As ordered by the Court, the notice was sent by electronic and regular mail to each class member on or before November 21, 2007.
In addition to being provided the notice, plaintiffs' counsel further provided each class member with direct correspondence explaining the proceedings to be held on the Motion for Order of Distribution, including the proposed method of allocation and the amount each municipality would receive (not including accrued interest) if the motion was granted; advising each municipality of its right to be heard either in support of or opposition to the motion at the hearing on November 30, 2007. The letter also invited each class member to contact plaintiffs' lead counsel with any questions or concerns about the proposed distribution.
On November 30, 2007, the Court conducted a hearing on the Motion for Order of Distribution and Motion for Attorneys Fees and Costs. Several representatives from various towns spoke in favor of both motions. Representatives from Hartford and Waterbury, the largest cities in the Mid-Conn Project, also spoke in favor of the motions. As of the time of the hearing, no class member had contacted plaintiffs' counsel to oppose the proposed method of allocation of the funds in the constructive trust. Further, no member either elected not to participate in the distribution or filed an objection to the method of allocation proposed in plaintiffs' motion. CRRA objected to both the Motion for Order of Distribution and the proposed Attorneys Fees. CRRA further objected to the inclusion of any post-judgment interest on the award. At the conclusion of the hearing, the court reserved decision.
A. Proposed Plan of Allocation
Plaintiffs' proposed method of distribution is based on the amounts of municipal solid waste (hereinafter referred to as "MSW") tonnage delivered to Mid-Conn Project facilities by or on behalf of each Mid-Conn Project municipality from FY 2002-2006. Pursuant to plaintiffs' plan, each Project municipality will receive a pro rata share of the funds in the constructive trust (plus accrued interest) based on the municipality's percentage share of the total tonnage. Each municipality's proposed pro rata share of the distribution is set forth on the Schedule attached to this decision and referred to as Court Appendix 1. (The appendix lists the percentage of tonnage for each town. The dollar amounts for each town are left blank due to the necessity to update interest at the time of disbursement and a question about the correct initial amount of attorneys fees calculated in the distribution.)
The proposed plan of allocation was approved by plaintiffs' Advisory Committee established to oversee this litigation. The Advisory Committee consisted of the First Selectmen from the Project Towns of New Hartford and Guilford, and two Project municipality corporation counsel from the Town of West Hartford and the City of Hartford.
The allocation methodology proposed by plaintiffs is identical to the plan of allocation adopted by CRRA's Board in January 2007 for a partial distribution of Enron-related litigation recoveries. In fact, plaintiffs' proposed plan of allocation utilizes the tonnage calculations utilized by CRRA in calculating distributions in January 2007. None of the Project municipalities objected to plaintiffs' proposed use of the tonnage methodology at the November 30, 2007 hearing.
The Court approves the allocation method based on the total tonnage of MSW delivered to the Mid-Conn Project facilities and attributable to each Project municipality as the fairest method of allocating the funds in the constructive trust. Several factors lead the Court to this conclusion:
1. Each of the Project municipalities has a contractual commitment to deliver all of its MSW to Mid-Conn facilities. Some Project municipalities fulfill that commitment by utilizing municipal services to deliver all of their MSW and pay the tip fee out of municipal revenues. Some of the municipalities fulfill their commitment by relying on private haulers to deliver some or all of their MSW. In those cases, the tip fees are not paid directly by the municipality, but are paid by the private haulers, who pass the cost of the tip fees onto their customers, the citizens of the municipalities. In either case, however, the tip fee increases at issue in this litigation have ultimately been paid by the taxpayers of each municipality; either directly, in the form of the increased taxes needed to fund the municipality's increased payments, or indirectly, in the form of increased charges by the private haulers.
2. An allocation based solely on the amounts paid by each municipality (and excluding the amounts paid private haulers for deliveries on behalf of each municipality) would be unfair. Under that method of allocation, a number of municipalities — which relied solely on private haulers — would receive nothing in restitution for their taxpayers' losses. Other municipalities (which relied partially on private haulers) would receive a proportionately decreased restitution for their taxpayers' losses.
3. CRRA's Board of Directors has already approved a plan utilizing the tonnage approach as the basis for its then-proposed partial distribution of Enron-litigation recovery funds to the Project municipalities. No Project municipality objected to such an approach, even those members who would have received more money pursuant to the amount paid approach.
Therefore, the Court concludes that the proposed method of allocation, based on the total tonnage delivered by or on behalf of the Project municipalities from FY 2002-2006 provides for fair restitution to each Project municipality. This method of allocation is hereby approved by the Court.
II. STANDING
During the hearing on November 30, 2007, CRRA objected to Plaintiffs' Motion for Attorneys Fees. CRRA also objected to the award of any post-judgment interest in the matter. Plaintiffs' attorney objected to CRRA's position on the grounds that, since CRRA is not paying any of the attorneys fees, it has no standing to object. Further, plaintiffs argue, since CRRA is not a member of the class, it has no right to object to the Motion for Order of Distribution. The Court allowed CRRA's attorney to argue his objection. However, it is appropriate, in the court's opinion, for the court to discuss the issue at this point.
CRRA has objected to the inclusion of any interest on the judgment. This issue will be discussed in the next section. Indeed, if the Court were to accept CRRA's argument, the interest which has accrued on the constructive trust fund would be returned to CRRA. If the Court does not accept CRRA's argument, the interest will be distributed on the pro rata allocation of tonnage basis which the court has approved. On that limited issue of the inclusion of interest, the court holds that CRRA has standing to object to the proposed order of distribution. The arguments submitted by CRRA's counsel, to the extent relevant to that limited purpose, were accepted for that purpose only. However, in view of the fact that CRRA is not a member of the class, and will not be paying the plaintiffs' attorneys fees, the court holds that CRRA does not have standing to object to the award of attorneys fees. As a practical matter, CRRA's argument was based upon its' view of the status of the law on attorneys fees in class action lawsuits in Connecticut. The Court disagrees with CRRA's position.
III. INTEREST
In its June 19, 2007 Memorandum of Decision, this Court declined to award prejudgment interest. The Court opined that since this lawsuit involved a suit for restitution, and not a suit for damages, Connecticut General Statutes Section 37-3a did not apply.
CRRA argues that the same reasoning should apply to the award of post-judgment interest. In a case for money damages, Section 37-3a authorizes the award of post-judgment interest. O'Leary v. Industrial Park Corp., 211 Conn. 648, 653, 560 A.2d 968 (1989). CRRA argues that, just as the Court held that pre-judgment interest does not apply to a case of restitution, logic dictates that post-judgment interest must not be awarded.
At some point after the Court's June 19, 2007 Memorandum of Decision the parties agreed that the constructive trust monies could be placed in an account with the State Treasurer, and would earn interest in accordance with the rate in the State account. Plaintiffs note, with surprise, that there was no objection to this procedure filed by CRRA. Plaintiffs contend that they are not seeking post-judgment interest. Otherwise, they contend that they would be requesting the ten percent interest contemplated by C.G.S. Section 37-3a. Instead, they contend that when the court ordered, in June, that the plaintiffs had an immediate right to the monies held by CRRA, the plaintiffs, as a matter of equity, were entitled to that money and any monies derived therefrom until such time that the constructive trust was forwarded to them.
The monies have earned interest in an account held by the State of Connecticut, since a time shortly after the Decision was rendered. The interest on the trust is represented to be slightly over $800,000 at this time. There has not been any motion filed by the plaintiffs for the award of post-judgment interest. It is their position that they have been rightly entitled to the monies since June 19, 2007, and any interest derived from their trust should equitably be theirs. The Court agrees. The corpus of the trust belonged to the plaintiffs as of the date of the Court's decision. Any profits on that corpus since the date of the decision should flow with the corpus. The Court made an equitable award of restitution in this matter. Equitably, the monies in the account held by the State Treasurer in this matter should all be transferred to the Plaintiffs' attorney, as trustee, for distribution.
The Court's ruling is in accord with existing case law. It is a well-established principle that a constructive trustee may be compelled not only to convey or assign the corpus of the trust property, but "to account for and pay over the rents, profits, issues and income which the constructive trustee has actually received, or, in general, which he might by the exercise of reasonable care and diligence have received." Ryan v. Plath, 18 Wash.2d 839, 865, 140 P.2d 968 (1943). "The law is clear that if a constructive trust is to be imposed on money and other property, the beneficiary thereof is entitled to recover not alone the money and property so acquired but also interest on such money at the legal rate from the time of its receipt and the rents, income and profits on such property together with interest thereon at the legal rate from the time of receipt." Bank of America National Trust and Savings Assoc. v. Ryan, 207 Cal.App. 2d 698, 709 (1962).
The purpose of this rule is to make sure that the beneficiary is fully compensated for his losses and, equally important, to ensure that the defendant does not profit from his withholding of the trust corpus. Id. at 709-10 ("Any other principle of law would reward the wrong doer by permitting him to obtain the benefit and use of the property and money which he had wrongfully obtained without accounting for the rents therefrom or interest thereon").
In accordance with these principles, Connecticut courts have ordered defendants to pay accrued interest to the beneficiaries of funds held in constructive trust. Rosetti v. Amenta, Superior Court, judicial district of Hartford, Docket No. CV95 07057875 (August 8, 1997, Satter, J.) (imposing a constructive trust on corpus and ordering defendant to pay the balance "plus accrued interest"): see also Wight v. Lee, 101 Conn. 401, 126 A.2d 218 (1924) (since trustee has responsibility to keep sum in trust productive, beneficiary of trust entitled to interest that should have been earned pending distribution). Therefore, the accrued interest will be included in the distribution to the municipalities.
IV. ATTORNEYS FEES AND COSTS
Plaintiffs' counsel seek an award of attorneys fees, based on the common-fund percentage of recovery methodology, in the amount of $8,982,602, approximately 23.5% of the total monetary benefit obtained for the class to date in this litigation. Plaintiffs' counsel further seek reimbursement of litigation expenses in the amount of $174,427.02.
Established class action case law supports a percentage award of attorneys fees of 25% or more from recoveries producing a common fund for the benefit of the class members. See, e.g. Manual of Complex Litigation Section 14.121 ("Attorneys fees awarded under the percentage method are often between 25% and 30% of the fund"). Recently, class action fee awards of 25% or more have been rendered in the following cases involving settlements in the range of (or substantially greater than) the judgment rendered in this action. In re Priceline.com, Inc. Securities Litigation, 2007 WL 2115592 (D.Conn. July 20, 2007) (Covello, J.) (awarding attorneys fee of 30% of $80 million class action settlement); In re Bisys Securities Litigation, 2007 WL 2049726 (S.D.N.Y. July 16, 2007) (Rakoff, J.) (fee award of 30% on $65.8 million settlement) and Hoormann v. Smithkline Beecham Corp., Case No. 04-L-715 (Ill. Cir.Ct. Madison Co. May 17, 2007) (awarding attorneys fee of 26% of $63.8 million class action settlement).
Counsel's requested fee award in this case is thus substantially below the normal percentage routinely granted class counsel in common-fund cases that settle before trial. And, unlike the fee awards in those settled class actions, counsel's fee request in this action encompasses not only extensive pretrial discovery and motion practice, but more than twelve months of trial, post-trial and now appellate activity.
Equally important to the attorneys fees analysis is the fact that the percentage fee requested is millions of dollars lower than the fee to which counsel would be entitled based on hourly rates with the customary enhancer applicable in complex litigation. See In re EVCI Career Colleges Holding Corp. Securities Litigation, 2007 WL 2230177 at 17 (S.D.N.Y. July 27, 2007) (McMahon, J.) (noting that enhancement of hourly rate attorneys fee by a factor of five is "common" among courts in the Southern District of New York and is appropriate to compensate counsel for the complexity of a case and risks of contingent litigation).
This action was commenced in December 2003. The case has involved numerous mediation attempts, discovery and several months of trial. CRRA has filed and is prosecuting five separate appeals to the Connecticut Supreme Court from various decisions made by this Court. In the weeks since the Court's June 19, 2007 Memorandum of Decision was issued, CRRA has filed, and the plaintiffs have been forced to respond to, at least sixteen motions in this Court and the Connecticut Supreme Court.
In connection with their initiation of this action, the Towns of New Hartford and Barkhamsted entered into representation agreements with counsel. Pursuant to these agreements (and a similar representation agreement entered into by the Town of Winchester), plaintiffs' counsel agreed to undertake this litigation on a contingent basis, with their fee equal to 33 1/3% of any recovery. Counsel also agreed to advance all costs necessary for the prosecution of the action and agreed that reimbursement of the costs would come solely from any recovery.
In addition to the risk of non-recovery of a fee or out-of-pocket expenses inherent to this contingent fee agreement, the Towns requested, in light of the politically sensitive nature of this action, the right to withdraw this action at any time, without expense to the municipalities. Counsel agreed to this request in the representation agreements.
Prior to trial, when it appeared that a settlement of this action was possible, plaintiffs' Advisory Committee negotiated a reduced contingency fee agreement of 22.5% of the overall recovery for the class. The Advisory Committee believed it appropriate to increase this percentage to 23.5% in light of the substantial additional legal time devoted by plaintiffs' counsel in the trial and post-trial proceedings. The four law firms involved have devoted over 8,700 hours of legal time in the successful prosecution of plaintiffs' claims. It is anticipated that hundreds of more hours will be devoted to defending the five pending appeals. There has been no objection filed in opposition to the approval of attorneys fees, except by CRRA, as previously discussed. The three municipalities with the largest stakes in the distribution, namely: Hartford, Waterbury, and West Hartford, have supported the attorneys fee application.
A. The Standards Governing Attorneys Fees Awards in Class Actions CT Page 21000
The Connecticut Supreme Court has held that because Connecticut's class action law is relatively undeveloped, and in light of the similarity between Connecticut's and federal class action rules, it is appropriate to look to federal case law "for guidance in construing our law governing class actions." Collins v. Anthem Health Plans, Inc., 266 Conn. 12, 33, 836 A.2d 1124 (2003). In particular, decisions by the United States Court of Appeals for the Second Circuit, although not binding on Connecticut's courts, "are particularly persuasive" on class action issues. Id. at 52 n. 22, citing Turner v. Frowein, 253 Conn. 312, 341, 752 A.2d 955 (2000). It is, thus, appropriate to look to federal case law, and in particular to Second Circuit case law, for guidance on the standards governing awards of attorneys fees in class actions.Federal and, in particular, Second Circuit-case law is clear that where counsel in a class action produce a common fund benefitting all members of the class, an award of attorneys fees, based on a percentage of the recovery, is appropriate Goldberger v. Integrated Resources, Inc., 209 F.3d 43, 47 (2d Cir. 2000), and that percentage awards of 25% and over are customary. See, generally, Manual of Complex Litigation Section 14.121 ("Attorneys fees awarded under the percentage method are often between 25% and 30% of the fund").
The United States Supreme Court has recognized that "the common-fund doctrine reflects the traditional practice in courts of equity," Boeing Co. v. Van Gemert, 444 U.S. 472, 478 (1980), and that "a lawyer who recovers a common fund for the benefit of persons other than . . . his client is entitled to a reasonable attorneys fee from the fund as a whole." Id. "The doctrine rests on the perception that persons who obtain the benefit of a lawsuit without contributing to its cost are unjustly enriched at the successful litigant's expense." Id. The common-fund doctrine enables courts to "prevent this inequity by assessing attorneys fees against the entire fund, thus spreading fees proportionately among those benefitted by the suit." Id.
Thus, pursuant to the "`equitable' or `common fund' doctrine established more than a century ago in Trustees v. Greenough, 105 U.S. 527, 532-33 (1881), attorneys who create a common fund to be shared by a class are entitled to an award of fees and expenses from that fund as compensation for their work." In re American Bank Note Holographics, Inc. Securities Litigation, 127 F.Sup.2d 418, 430 (S.D.N.Y. 2001).
In Goldberger, 209 F.3d at 47, the Second Circuit identified two methods for determining a reasonable attorneys fee in a common fund action. "the first is the lodestar, under which the district court scrutinizes the fee petition to ascertain the number of hours reasonably billed to the class and then multiplies that figure by an appropriate hourly rate" and then adjusts the total by an appropriate multiplier, based on such subjective factors as complexity of the litigation, quality of the representation, difficulty of the case, and counsel's risk of non-recovery. Goldberger, at 47.
The second method allows the court to set "some percentage of the recovery as a fee" by considering the "same less objective" factors that are used to determine the multiplier for the lodestar." Id. The percentage of recovery method not only avoids "an unanticipated disincentive to early settlements" created by the lodestar method, but has also been found to be "simpler" and more efficient, in that it avoids an otherwise "gimlet-eyed review" of counsel's detailed lodestar. Goldberger, at 48-49.
It is now well-established that "the trend of district courts within this Circuit is to utilize the percentage of recovery approach when calculating attorneys fees in common fund cases." In re EVCI Career Colleges Holding Corp. Securities Litigation, 2007 WL 2230177 at 15. In addition to the Second Circuit, The First, Third, Sixth, Seventh, Ninth, and Tenth Circuit Courts of Appeals have also adopted the percentage method for use in common fund cases. See In re Thirteen Appeals Arising Out of the San Juan Dupont Plaza Hotel Fire Litigation, 56 F.3d 295, 306 (1st Cir. 1995).
The percentage of recovery method was essential to the Project municipalities to enable them to proceed with this action, without expense, and to attract experienced counsel by offering an opportunity for sufficient compensation to warrant the risk that no fee would be earned. Smaller municipalities, like the named plaintiffs, did not have the monies in their budgets to prosecute an action of this nature, and benefitted greatly from counsel's willingness to prosecute the case on a percentage of recovery basis. Courts have recognized that "[i]n 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." In re WorldCom, Inc. Securities Litigation, 388 F.Sup.2d 319, 359 (S.D.N.Y. 2005).
The Second Circuit has set forth six factors that are appropriately considered in determining the reasonableness of the fee in common fund class action cases:
(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 the representation; (5) the requested fee in relation to the settlement; and (6) public policy considerations. Goldberger, 209 F.3d at 50.
Consideration of the relevant Goldberger factors clearly supports an award of a fee of 23.5% of the settlement fund to plaintiffs' counsel in this case.
a. Significant Time and Labor Expended by Plaintiffs' Counsel
Thus far, close to 8700 hours have been expended by plaintiffs' counsel (and some paralegal time properly included) in the prosecution of this matter. It is anticipated that perhaps hundreds of additional hours may be expended defending the five appeals which are currently pending. Certainly the time expended supports the requested fee, particularly in light of the experienced trial counsel who represented the plaintiffs.
b. The Magnitude and Complexities of the Litigation
This case was extremely complex involving hundreds of exhibits and several unique theories of law. The post-trial briefs total close to 400 pages.
c. Risks of Litigation
Plaintiffs faced significant litigation risks, including difficulty of proving many of the elements of plaintiffs' causes of action as well as significant statutory defenses to plaintiffs' claims. They faced difficulty, inter alia, in obtaining class certification, showing how the purported Enron energy transaction was, in fact, a concealed loan, overcoming the language of the contract and defenses asserted by CRRA. Certainly, plaintiffs' counsel faced a substantial risk of non-payment by agreeing to the contingent fee, in view of the complexities of the case. Plaintiffs' counsel also faced the risk of non-payment by agreeing that the Towns that signed the contingency agreement could withdraw at any time without having to pay either fees or costs.
d. Quality of Representation
The plaintiffs received representation of the highest order by all of the law firms involved. It is difficult for the court to imagine any higher quality of legal ability than exhibited in this case. An excellent result was achieved. In addition, the plaintiffs obtained an injunction against further charges related to Enron, and a correction of over six million dollars in the 08 budget. It is noteworthy that plaintiffs' counsel did not charge any extra for the savings achieved on the 08 budget.
e. The Requested Fee in Relation to the Settlement
The 23.5% fee is reasonable and consistent with fees awarded in similar complex class action litigations of comparable value. It certainly does not create a windfall to plaintiffs' counsel. Counsel could have attempted to charge more based upon the initial retainer agreements that were signed. An award between 25% and 30% in cases of this nature is not unusual. The Court finds that the fee is not only reasonable, but also exceedingly fair to the plaintiffs.
f. Public Policy Considerations Fully Support the Requested Fee
Private enforcement actions such as this case are a necessary adjunct to government intervention because the relevant government authorities do not have sufficient wherewithal to provide redress for all misconduct which occurs under their regulatory supervision. See, e.g., Bateman Eichler, Hill Richards, Inc., 472 U.S. 299 at 310 (1985), quoting J.I. Case Co. v. Borak, 377 U.S. 426, 432 (1964) (lawsuits brought by investors provide "a most effective weapon in the enforcement of the securities laws and are a necessary supplement to SEC action").
The "public policy considerations" factor of the Goldberger analysis is particularly persuasive authority for the requested fee here. The benefits obtained by the class member municipalities would not have been possible absent the willingness of plaintiffs' counsel to assume their representation on a contingent fee basis. This litigation was initiated by the Town of New Hartford — a municipality of 6,000 residents with an annual municipal budget for legal costs of less than $25,000. The Town of New Hartford would never have been able to pursue and maintain this action had it been required to pay experienced litigation counsel on an hourly basis. Nor could the Town of New Hartford — or any member of the plaintiff class — have obtained relief from the relevant governmental authorities.
g. "Cross-Check" of Plaintiffs' Counsel's Lodestar
Federal law encourages courts to cross-check the reasonableness of an attorneys fee calculated as a percentage of the common fund by comparing the proposed percentage recovery to the attorneys fee to which counsel would be entitled under the lodestar method. Goldberger, 209 F.3d at 50. This cross-check serves to make sure that counsel is not receiving a "windfall" from a percentage award without having put in legal time to warrant the award. Where the lodestar is "used as a mere cross-check, the hours documented by counsel need not be exhaustively scrutinized by the district court," but rather, "the reasonableness of the claimed lodestar can be tested by the court's familiarity with the case." Id.
In cases where counsel have undertaken a difficult matter on a contingency basis and have secured a favorable result for the class, the normal multiplier is 4-5 times the lodestar. EVCI, 2007 WL 2230177 at 17 (noting that "lodestar multipliers of nearly 5 have been deemed "common" by courts in [the Southern District of New York]").
The four firms representing the plaintiffs have, together, devoted over 8,700 hours of legal (and paralegal) time in the prosecution of plaintiffs' claims. The current hourly rates for counsel's services range from $275 per hour to $550 per hour. They result in a lodestar, before multiplier enhancement, of over $4.487 million.
Applying a conservative multiplier of 4 to the hours and hourly rates of plaintiffs' counsel would produce a lodestar award of over $17.5 million, almost double the percentage fee award requested. The 23.5% award Counsel seek translates into a multiplier of a little over 2 times the basic lodestar, well below the lower range of approved lodestar multiplier awards in class actions. Thus, to the extent the cases indicate that the lodestar analysis provides a "cross-check" of a percentage award to ensure that it is not a windfall, the lodestar cross-check in this case fully supports the reasonableness of the 23.5% award requested.
B. The Class Approves the Fee Request
"The reaction by members of the Class is entitled to great weight by the Court" and confirms the reasonableness of the requested fee. Maley v. Del Global Technologies Corp., 186 F.Sup.2d 358, 374 (S.D.N.Y., 2002). Plaintiffs' counsel fee request has been expressly approved by the Plaintiffs' Advisory Committee. Further, all members of the class were duly notified of the hearing on November 30, 2007. No member of the class has objected to either the proposed distribution or to plaintiffs' counsel request for an award of attorneys fees. In fact, numerous members of the class spoke in favor of these motions at the hearing. This "overwhelmingly positive response" strongly evidences that the fee request is fair and reasonable. Id.
C. Reimbursement of Expenses
The law is also well established that counsel who create a common fund are entitled to the reimbursement of expenses that they advance to the class. Teachers' Ret. Sys., 2004 U.S. Dist. LEXIS 8608, at 17. "Courts routinely grant the expense requests of class counsel." In re Gilat Satellite Networks, Ltd., 2007 WL 2743675 at 17 (E.D.N.Y. September 18, 2007) (Sifton, S.J.).
As set forth on the Schedules of expenses attached to plaintiffs' counsel's Motion for Award of Attorneys Fees and Reimbursement of Expenses, counsel have incurred an aggregate of $174,427.02 in expenses to date in prosecuting this litigation. The Court hereby approves reimbursement from the common fund of these expenses.
D. Connecticut Superior Court Decisions on Class Action Attorneys Fees
There are two reported Connecticut Superior Court decisions discussing the issue of attorneys fees in class action litigation. First, in Jacobson v. Security-Connecticut Life Ins. Co., Superior Court, complex litigation docket at New Britain, Docket No. X03 CV 95 0493100S (August 9, 1999, Aurigemma, J.) Judge Aurigemma applied the lodestar approach and awarded an enhancement multiplier of 2. Judge Aurigemma noted in Jacobson that "while in the abstract 25% of a common fund may seem reasonable, the size of the common fund and the relationship between the actual time devoted by the attorneys to the proposed percentage fee are factors which must be considered. This is probably why percentage fee awards vary greatly and the percentage of the total fund tends to decrease as the size of the fund increases." It is noteworthy that this decision was rendered before the dominant trend developed in the Second Circuit of awarding attorneys fees in class action lawsuits based upon the common-fund approach with the lodestar method used as a cross-check. The decision also preceded the Goldberger factors analysis. In 2007 Courts in the Second Circuit awarded attorneys fees of 30% on settlements of both 65.8 million and 80 million. See Bisys and Priceline, Supra.
Second, in Gray v. Foundation Health Systems, Superior Court, complex litigation docket at Waterbury, Docket No. X06 CV99 0158549 5 (April 21, 2004, Alander, J.) Judge Alander approved a lodestar approach with an enhancement multiplier of 1.7 upon his review of the attorney's request for said approach, after a settlement had been reached in the matter. In that case, a percentage of the common fund approach was neither submitted nor requested by the attorneys.
Obviously, in any evaluation of appropriate attorneys fees to be awarded in class action lawsuits, each case must be evaluated on its' own merits. This Court believes that the percentage of common-fund approach is the better approach in cases of this nature, with the lodestar "cross-check" used to prevent a potential "windfall" result. Parenthetically, the Court notes that even if the multiplier enhancement of either 1.7 or 2 were used in this case, pursuant to a strict lodestar approach method, the attorneys fees approved would be very close to the 23.5% percentage of common fund approach approved by the Court.
III. CONCLUSION
Based upon the foregoing reasons, Plaintiff's Motion for Order of Distribution is Granted, and the Plan of Distribution is hereby approved. (As to percentage of allocation. The attorneys are to insert the correct amounts, pursuant to the court's decision upon receipt of all monies plus accrued interest from the State treasurer. The attorneys should file a final distribution with the Court, with the correct amounts distributed to each town, when all monies are disbursed.) The funds shall be distributed in accordance with Appendix 1 attached hereto, together with a corresponding distribution on the same pro rata basis for all accrued interest received by the law firm of Silver Golub Teitell LLP, as Trustee for the class.
The Motion for an Award of Attorneys Fees and Reimbursement of Expenses is Granted. The Attorneys Fees on the basis of 23.5% of the common fund, together with accrued interest, and reimbursement of all expenses out of the common fund is hereby approved. It is directed that the State Treasurer issue one check for all monies held in the fund, together with accrued interest, to Silver Golub Teitell LLP, Trustee, which funds shall then be distributed by said law firm in accordance with the Court's order.