Opinion
MASTER FILE NO. CV-96-5238.
April 2, 2004
REPORT AND RECOMMENDATION
In this antitrust action, a class of approximately five million merchants alleged, among other things, that defendants Visa U.S.A. Inc. and MasterCard International Incorporated were illegally tying their debit products to their credit cards, in violation of the Sherman Act. On June 4, 2003, the plaintiffs entered into a preliminary settlement agreement with each of the defendants separately. Thereafter, Lead Counsel for the Class, Constantine Partners, P.C. ("Lead Counsel"), sought this Court's approval of the settlements. They also asked this Court for an award of $609 million in attorneys' fees for their efforts and the efforts of co-counsel in successfully prosecuting the case, as well as reimbursement of expenses. Seventeen class members objected to Lead Counsel's request for attorneys' fees and expenses.
By Opinion and Order dated December 19, 2003, the Honorable John Gleeson approved both settlements (collectively, "the Settlement Agreements"), awarded Class Counsel $220,290,160.44 in attorneys' fees, and authorized the reimbursement of costs in the amount of $18,716,511.44. See In re: Visa Check/MasterMoney Antitrust Litigation, 297 F. Supp.2d 503 (E.D.N.Y. 2003). Counsel for fourteen of the Objectors who opposed Lead Counsel's fee request are now petitioning this Court for an award of attorneys' fees and expenses in connection with their objections. Two of these Objectors also seek a representative fee. Lead Counsel oppose these requests.
By order dated February 17, 2004, Judge Gleeson appointed me Special Master to issue reports and recommendations regarding referred disputes arising out of or relating to the Visa and MasterCard Settlement Agreements. Judge Gleeson then referred to me the Objectors' requests for attorneys' fees, expenses and representative fees.
For the reasons stated below, I respectfully recommend that this Court:
(1) deny the fee petition submitted by John F. Duane, Esq., N. Albert Bacharach Jr., Esq., Paul S. Rothstein, Esq., and Frank H. Tomlinson, Esq., counsel for Objectors 710 Corp. and Leonardo's Pizza by the Slice, Inc.;
(2) award John W. Davis, Esq., and Steven F. Helfand, Esq., counsel for Objectors Rent Tech, Inc., and Rental Solutions, Inc., $15,721.13, representing compensation for 33.7 hours of attorney time at a rate of $350 per hour, plus 15.5 travel hours at an hourly rate of $175.00, plus reimbursement for $1213.63 in expenses;
(3) award R. Stephen Griffis, Esq., counsel for Objectors Sound Deals, Inc., and Digital Playroom, Inc., $6180.18, representing compensation for 15.47 hours of attorney time at an hourly rate of $300, plus 4.75 hours of travel time at $150, plus reimbursement for $826.68 in expenses;
(4) award Kearney Dee Hutsler, Esq., counsel for Objectors Duke Products, Inc., and Southern Network Services, Inc., $3851.44, representing compensation for 12.67 hours of attorney time at an hourly rate of $300, plus reimbursement for $50.44 in expenses;
(5) Charles M. Thompson, Esq., counsel for Objector Village Fabrics and Furnishings, Inc., $1505, representing compensation for 4.3 hours of attorney time at an hourly rate of $350;
(6) award John H. Pentz, Esq., counsel for Objectors Round House Inc., Ron Fred, Inc., Bailey's, and Ron Jen, Inc., $12,316, representing compensation for 28 attorney hours at an hourly rate of $350, plus twelve travel hours at an hourly rate of $175, plus reimbursement for $416 in expenses;
(7) award J. Scott Kessinger, Esq., counsel for Objector Kickers Corner of the Americas, Inc., $6875, representing compensation for 25 attorney hours at an hourly rate of $275;
(8) award Lawrence W. Schonbrun, Esq., counsel for Objector Roman Buholzer, $8,066.87, representing compensation for ten attorney hours at the hourly rate of $350, plus eighteen travel hours at the hourly rate of $175, plus reimbursement of $1416.87 in expenses; and
(9) deny Mr. Hutsler's request for a representative fee for his clients, Objectors Duke Products, Inc., and Southern Network Services, Inc.
BACKGROUND
In a complaint filed on October 25, 1996, the named plaintiffs "alleged that the defendants' practice of requiring merchants who accepted defendants' credit cards to also accept their debit products . . . was an illegal tying arrangement, in violation of section 1 [of the Sherman Act]." In re: Visa Check/MasterMoney Antitrust Litigation, 297 F. Supp.2d 503, 507 (E.D.N.Y. 2003). They "further alleged that, through these tying arrangements and other anticompetitive conduct, the defendants attempted to monopolize the debit card market, in violation of section 2 [of the Sherman Act]." Id. This Court certified the class by Order dated February 22, 2000, and the Second Circuit affirmed that Order on October 17, 2001. Id. at 507-08.After motion practice, and on the brink of trial, the plaintiffs entered into preliminary settlement agreements with each of the defendants. See id. at 508. These Settlement Agreements provided, among other things, for "the creation of a $3.05 billion settlement fund." Id. at 508. Thereafter, Lead Counsel sought this Court's approval of the Settlement Agreements and plan of allocation, an award of attorneys' fees in the amount of $609 million, and reimbursement of their expenses. Id. at 506-07.
"Only 18 merchants, out of approximately five million, filed objections to the Settlements and the plan of allocation." Id. at 509 n. 6 "[A] total of 17 merchants . . . objected to Lead Counsel's fee request." Id. at 509 n. 6; see also id. at 522 n. 27. Class Counsel responded to the fee objections by papers dated September 18, 2003. See Class Counsel's Response to Objections to Their Petition for Attorneys' Fees and Reimbursement of Costs and Expenses ("Response to Fee Objections").
On September 25, 2003, this Court "held a fairness hearing in [the] ceremonial courtroom to hear arguments of th[e Objectors] and any others that might be raised." Id. at 509. Counsel for many of the Objectors appeared at the hearing.
On December 19, 2003, this Court issued an Opinion and Order approving the Settlement Agreements, awarding Class Counsel $220,290,160.44 in attorneys' fees, and authorizing the reimbursement of costs in the amount of $18,716,511.44. With respect to the award of attorneys' fees and expenses, this Court stated (inter alia):
. . . [I]n light of all of the circumstances of this case, I award attorneys' fees in the amount of $220,290,160.44. This amount represents approximately 6.511% of the Fund. The lodestar cross-check, which results in a multiplier of 3.5, further convinces me that my award is reasonable.
. . .
Last, I award Lead Counsel reimbursement from the Fund for $18,716,511,44 in costs and expenses. The lion's share of these expenses reflects the costs of experts and consultants, litigation and trial support services, document imaging and copying, deposition costs, online legal research, and travel expenses. I see no reason to depart from the common practice in this circuit of granting expense requests.Id. at 525 (citations omitted).
Counsel for fourteen of the seventeen merchants who objected to Lead Counsel's fee request have now filed their own petitions for attorneys' fees and expenses. Two of the Objectors are also seeking a representative fee.
DISCUSSION
I. The Objectors' Fee Petitions
The first question presented by these fee petitions is whether Objectors' attorneys are entitled to compensation for the work they performed in this case. Lead Counsel argue that they are not, because "[t]here is nothing in the Court's December 19, 2003 Order approving the Settlements and the Plan of Allocation indicating that the Court's decision was influenced in any way by the written or oral submissions from the objectors whose counsel are now seeking fees." Lead Counsel's Combined Response to Objectors' Petitions for Attorneys' Fees and Expenses ("Opposition") at 1.
The Objectors' attorneys disagree. Some argue that they are entitled to fees because their efforts resulted in a savings to the class of $388,709,836.26 — the difference between Lead Counsel's fee request and the fee that this Court awarded. Others acknowledge that this Court would have reduced Lead Counsel's fees even in the absence of Objectors' comments, but contend that an award of fees is warranted in any event.
See, e.g., Counsel for Objectors 710 Corp. and Leonardo's Pizza by the Slice, Inc. Application for Attorney's Fees and Expenses ("Leonardo's Pizza by the Slice Fee Petition") at 1 ("Aforesaid objectors' counsel claim entitlement to attorney's fees based on the objection to the $609,000,000.00 requested and the Court's subsequent reduction of the fees requested by Class Counsel by $388,709,839.26. . . .").
See, e.g., Petition for an Award of Attorney's Fees and Expenses by John J. Pentz and Scott J. Kessinger ("Pentz Kessinger Fee Petition") at 2-3 ("This Court's reaction to Lead Counsel's fee request was so unequivocal as to preclude any argument that, but for the fee objectors, Lead Counsel's fee request might have evaded scrutiny and slipped under the radar. Objectors, however, are not held to such a strict but-for test in order to qualify for an award of attorney's fees.").
The Second Circuit has recognized that objectors play a "valuable and important role . . . in policing class action settlements." In re Independent Energy Holdings PLC Securities Litigation, No. 00 Civ. 6689 (SAS), 2003 WL 22801724, at *1 (S.D.N.Y. Nov. 24, 2003) (citing White v. Auerbach, 500 F.2d 822, 828 (2d Cir. 1974)). Thus, under Second Circuit law, objectors are "entitled to an allowance as compensation for attorneys' fees and expenses where a proper showing has been made that the settlement was improved as a result of their efforts."White, 500 F.2d at 828; see also City of Detroit v. Grinnell Corp., 560 F.2d 1093 (2d Cir. 1977) ("an attorney whose actions have conferred a benefit upon a given group or class of litigants may file a claim for reasonable compensation for his efforts"), abrogated on other grounds, Goldberger v. Integrated Resources, Inc., 209 F.3d 43 (2d Cir. 2000). "[T]he trial judge has broad discretion in deciding whether, and in what amount, attorneys' fees should be awarded, since he is in the best position to determine whether the participation of objectors assisted the court and enhanced the recovery." White, 500 F.2d at 828.
In White, 500 F.2d at 827, the district judge who approved the settlement died before class counsel or objectors moved for attorneys' fees. Finding it "`noteworthy' that `nowhere in the record did Judge McLean indicate that any objector benefited this settlement,'" the district judge to whom the case was transferred declined to award fees to objectors' attorneys.Id. (quoting district judge). The Second Circuit reversed and remanded for an evidentiary hearing regarding what influence the objectors had on the district judge who approved the settlement.Id. at 829-30.
In my opinion, the following paragraph from this Court's December 19, 2003 Opinion and Order makes abundantly clear that this Court would have awarded a lesser fee than Lead Counsel requested with or without the objections that give rise to these fee petitions:
[Lead Counsel's] requested fee is excessive. Indeed, after considering it against the backdrop of my obligation to fashion a fee award with a "jealous regard" for the financial interests of the five million merchants on whose backs the Settlements were achieved, I conclude that Lead Counsel's request to be paid almost 10 times their hourly rate is absurd. The $609 million request is not a useful starting point; it is not a figure from which reductions can be made based on nuanced disagreements with counsel's methodology or arguments. It is fundamentally unreasonable, and wholly out of character for a group of counsel whose commitment to the corner store merchants they represent has, until now, been admirable and unflagging. I therefore reject it entirely.
In re Visa Check/MasterMoney Antitrust Litigation, 297 F. Supp.2d 503, 522-23 (E.D.N.Y. Dec. 19, 2003) (footnote omitted).
Although I am convinced that this Court would have reduced Lead Counsel's fee request even in the absence of the efforts of these Objectors, I nevertheless respectfully recommend that this Court grant the Objectors a reasonable award of attorneys' fees.
Several courts in this circuit have awarded attorneys' fees even in the absence of a showing that the objectors obtained an economic benefit for the class. For example, the court in In re Independent Energy Holdings PLC Securities Litigation, No. 00 Civ. 6689 (SAS), 2003 WL 22801724 (S.D.N.Y. Nov. 24, 2003), reduced class counsel's fee request, as the objectors urged. Although stating that it "likely [would] have reached the same result, with or without the objectors' comments," the Court nevertheless concluded that the objectors were entitled to an award of fees because "some of the viewpoints and facts highlighted by the objectors assisted the Court in making an appropriate fee award" and because the "the overall settlement was improved by their efforts." Id. at *1.
Similarly, in Frankenstein v. McCrory Corp., 425 F. Supp. 762 (S.D.N.Y. 1977), a class member sought attorney's fees for objecting to the structure of the settlement. The court granted the request for fees, reasoning (id. at 767):
The objections raised, although ultimately overruled, were not frivolous, and the presence of an objector represented by competent counsel transformed the settlement hearing into a truly adversarial proceeding. The objections to the settlement caused this Court to spend even more hours in analyzing and assessing the complex settlement agreement, and cast in sharp focus the question of the fairness and adequacy of the settlement to all the members of the class.
By contrast, the court in In re Anchor Securities Litigation, No. CV-88-3024, 1991 WL 53651 (E.D.N.Y. Apr. 8, 1991), declined a request to award fees to objectors' counsel even though it had reduced class counsel's fee request, as the objectors had urged it to do. The court concluded that fees were not warranted because the efforts of the objectors' attorney had not "affected the outcome as to fees in any way." To the contrary, the court held, objectors' sole contribution was to "cloud rather than sharpen the issues." According to the court, their efforts therefore stood in sharp contrast to Frankenstein, 425 F. Supp. at 767 (discussed supra), "where non-frivolous but non-meritorious objections served to sharpen the court's focus," and Howes v. Atkins, 668 F. Supp. 1021, 1027 (E.D.Ky. 1987), where "a vigorous objector, though losing on the merits, pose[d] questions in such a way as to make the court `more comfortable in approving the settlement,' even though the settlement was not `improved.'" Anchor Securities Litigation, 1991 WL 53651 at *2.
Although I was not privy to this Court's thought processes regarding Lead Counsel's fee petition, the arguments the Objectors raised in opposition to that petition were not frivolous, Frankenstein, 425 F. Supp. at 767 (awarding fees where "[t]he objections raised, although ultimately overruled, were not frivolous"), as is evidenced by the fact that this Court concluded — as the Objectors urged — that Lead Counsel's fee request was excessive. It therefore seems possible that "some of the viewpoints and facts highlighted by the objectors assisted the Court in making an appropriate fee award." Independent Energy Holdings PLC Securities Litigation, 2003 WL 22801724, at *1; see also Frankenstein, 425 F. Supp. at 767 (objectors' arguments "cast in sharp focus the question of the fairness and adequacy of the settlement to all the members of the class"). At a minimum, the Objectors "reintroduc[ed] an adversarial relationship into the settlement," Vollmer v. Selden, 350 F.3d 656, 660 (7th Cir. 2003), and it seems unlikely that, having done so, they "clouded rather than sharpened the issues,"Anchor Securities Litigation, 2001 WL 53651 at *2. Accordingly, I respectfully recommend that this Court grant the Objectors an award of attorneys' fees.
If this Court agrees, the next question is how those fees should be calculated. "Courts typically use one of two methods to determine a reasonable attorneys' fee: (1) the percentage of recovery method or (2) the lodestar method." Independent Energy Holdings, 2003 WL 22801724, at *1. "Under the lodestar method, the district court `scrutinizes the fee petition to ascertain the number of hours reasonably billed and then multiplies that figure by an appropriate hourly rate.'" Id. (quoting Goldberger v. Integrated Resources, Inc., 209 F.3d 43, 47 (2d Cir. 2000)). "The trend in the Second Circuit is towards the percentage method, which spares the court and the parties the `cumbersome, enervating, and often surrealistic process' of lodestar computation." Visa Check/MasterMoney Antitrust Litigation, 297 F. Supp.2d at 520 (citing Sheppard v. ConEd, No. 94-CV-0403, 2002 WL 2003206, at *7 (E.D.N.Y. Aug. 1, 2002), and quotingGoldberger, 209 F.3d at 50 (quotation marks omitted)). However, "when the percentage method is used . . . the Second Circuit `encourage[s] the practice of requiring documentation of hours as a `cross-check' on the reasonableness of the requested percentage.'" Id. at 520-21 (quoting Goldberger, 209 F.3d at 50).
Whichever method the court employs, "the key consideration in awarding fees is what is reasonable under the circumstances."Id. at 521. Pursuant to the Second Circuit's holding inGoldberger, reasonableness is generally determined by an examination of the following criteria: "`(1) the time and labor expended by counsel; (2) the magnitude and complexities of the litigation; (3) the risk of the litigation . . .; (4) the quality of the representation; (5) the requested fee in relation to the settlement; and (6) public policy considerations.'" Id. (quoting Goldberger 209 F.3d at 50). Moreover, when calculating a reasonable fee, the district court is obliged "to act as a `fiduciary . . . a guardian of the rights of absent class members.'" Id. (quoting City of Detroit, 560 F.2d at 1099).
Several of the Objectors' attorneys ask this Court to award them a percentage of $388,709,836.26 — the difference between Lead Counsel's request for $609,000,000.00 and the $220,290,160.44 that this Court awarded. See, e.g., Leonardo's Pizza by the Slice Fee Petition at 1. For the following reasons, I respectfully recommend that this Court decline that request in favor of the lodestar method.
First, it is plain to me that this Court would have reduced Lead Counsel's fee award even in the absence of the objections that form the basis of these fee petitions. As a result, the Objectors cannot fairly claim credit for having saved the class $388,709,836.26 in attorneys' fees. For that reason, the lodestar method — which results in compensation based upon time spent, rather than result achieved — is, in my opinion, most likely to yield a fee that is reasonable under the circumstances.
Second, in my opinion, the award of even a small percentage of the difference between what Lead Counsel asked for and what this Court awarded would result in a windfall to Objectors' counsel.See Visa Check/MasterMoney Antitrust Litigation, 297 F. Supp.2d at 521 (noting that "[t]he Second Circuit has cautioned district courts . . . not to blindly follow a one-size-fits-all `benchmark' in determining the appropriate fee" because "[s]uch a practice `could easily lead to routine windfalls where the recovered fund runs into the multi-millions'" (quotingGoldberger, 209 F.3d at 52)). The fee request by counsel for Objectors 710 Corp. and Leonardo's Pizza by the Slice, Inc., illustrates this point. As described more fully below, they filed a ten-page objection to the proposed settlement agreements and made brief comments at the Fairness Hearing. They now seek an award of $2,915,323.77, which, they assert, amounts to only three-quarters of one percent of the difference between Lead Counsel's request for $609,000,000.00 and the $220,290,160.44 in fees that this Court awarded. See Leonardo's Pizza by the Slice Fee Petition at 1.
Clearly, $2,915,323.77 constitutes a very small percentage of the difference between the amount that Lead Counsel requested and the amount that this Court awarded, and an even smaller percentage still of the overall settlement fund. Nevertheless, an award of nearly $3 million as compensation for preparing and filing a ten-page brief and making a brief appearance at the Fairness Hearing would, in my opinion, constitute a windfall.
Because the Objectors are seeking compensation for their efforts in connection with the limited task of critiquing Lead Counsel's fee application, the lodestar method is, in my opinion, the more appropriate method for calculating their fees. See Independent Energy Holdings, 2003 WL 22801724, at *1 (calculating objectors' attorneys' fees using lodestar method).
If this Court agrees that attorneys' fees should be awarded and that the lodestar method is the most appropriate way to calculate those fees, the next question is what constitutes a reasonable rate. "The lodestar figure should be in line with those [rates] prevailing in the community for similar services by lawyers of reasonably comparable skill, experience, and reputation."Luciano v. Olsten Corp., 109 F.3d 111, 116 (2d Cir. 1997) (internal quotation marks omitted). "It is well-established that the `prevailing community' the district court should consider to determine the `lodestar' figure is the `district in which the court sits.'" Id.; see also New Leadership Committee v. Davidson, 23 F. Supp.2d 301, 304 (E.D.N.Y. 1998) (Magistrate Judge did not err in considering the rates of attorneys from the Southern District of New York). "The burden is on the applicant to produce satisfactory evidence in addition to the attorney's own affidavits showing that the requested rates are at the prevailing market level." Paulino v. Upper West Side Parking Garage, Inc., No. 96 Civ. 4910, 1999 WL 325363, at *3 (S.D.N.Y. May 20, 1999) (citing Blum v. Stenson, 465 U.S. 886, 896 n. 11 (1984)); see also New Leadership Committee, 23 F. Supp.2d at 304 (declining to consider affidavits supporting requested hourly rate where parties submitted such evidence for the first time in objecting to Magistrate Judge's report and recommendation). "The court may also look to attorneys' fees granted in other cases and rely on its own knowledge of similar cases to determine a reasonable rate." Paulino, 1999 WL 325363, at *3.
These attorneys requests hourly rates ranging from $275 to $550. See Affidavit of J. Scott Kessinger in Support of Fee Petition ("Kessinger Affidavit") ¶ 2 (requesting hourly rate of $275); Declaration of Lawrence W. Schonbrun in Support of Petition for Award of Reasonable Attorney's Fees and Reimbursement of Expenses ("Schonbrun Feb. 5 Declaration") ¶ 19(a) (requesting an hourly rate in the range of "$350 per hour and $550 per hour (depending on the hourly rates awarded to other objectors' counsel)"). Although some justify their requests by detailing their prior work as objector attorneys, see, e.g., Schonbrun Feb. 5, 2004 Declaration, none provides evidence regarding prevailing market rates in this legal community. Lead Counsel also does not present any evidence regarding prevailing market rates for objector attorneys in this community. They do object to Mr. Schonbrun's request for an hourly rate of $550, asserting that, "if a fee is awarded to Schonbrun . . ., it be awarded at his rate of $350.00 per hour." See Opposition at 11 n. 17.
I respectfully recommend that this Court award the hourly rates requested by each individual counsel, not to exceed $350. See Opposition at 11 n. 17 (requesting that, "if a fee is awarded to Schonbrun . . ., it be awarded at his rate of $350.00 per hour");Independent Energy Holdings PLC Securities Litigation, 2003 WL 22801724, at *2 (awarding, without discussion, hourly rates of $375 for objector attorneys); see also Luciano, 109 F.3d at 115-16 (affirming Judge Spatt's 1996 award of $200 per hour for partners, $135 per hour for associates); PBA v. City of New York, No. 97 Civ. 7895 (SAS), 2003 WL 21782675, at *3 (S.D.N.Y. July 31, 2003) (collecting cases) (awarding hourly rate of $350 for experienced attorneys and noting that "rates have gone up dramatically since 2000").
Lastly, there is the question of whether a multiplier should be applied. Several of the Objectors argue that a multiplier is warranted. See, e.g., Fee Petition of Objectors' Counsel for Rent Tech, Inc. and Rental Solutions Inc. ("Rent Tech Fee Petition") at 7 (seeking lodestar multiplier of 2.0); Counsel for Objectors Sound Deals, Inc. and Digital Playroom, Inc. Application for Attorney's Fees and Expenses ("Sound Deals Digital Playroom Fee Petition") at 8 (seeking a lodestar multiplier of 3.5). Lead Counsel oppose this request, contending that, if this Court determines that the Objectors are entitled to fees, it should not apply a multiplier. See Objection at 2 ("[I]f this Court finds that its decision approving the Settlements and Plan of Allocation was influenced by objectors' counsel's submissions, in particular its ruling to grant to Lead Counsel fewer attorneys' fees than those requested, then the Court should award objectors' counsel fees, with a multiplier of no greater than one."). Taking into account the six Goldberger factors, I respectfully recommend that this Court decline to award a multiplier.
The first factor is the time and labor expended by counsel. John W. Davis, Esq., and Steven F. Helfand, Esq., appearing on behalf of Objector Rent Tech, Inc. ("Rent Tech") (the successor in interest to Rental Solutions, Inc. (Fairness Hearing Tr. at 49)), are seeking compensation for the highest number of hours — a combined total of 254.2. Of those 254.2 hours, Mr. Helfand billed 138.4 — which (even assuming that it is not an excessive number of hours) is the approximate equivalent of one attorney working full time for only three and onehalf weeks. Compare Visa Check/MasterMoney Antitrust Litigation, 297 F. Supp.2d at 523 ("Class Counsel have litigated this case — which did not culminate in settlement until the eve of trial — for seven years.").
The second factor is the magnitude and complexity of the litigation. Here, the Objectors seek compensation for their efforts in connection with the limited task of critiquing Lead Counsel's fee application. See Anchor Securities Litigation, 2001 WL 53651, at *2 (refusing to award attorneys' fees to objectors where "[n]o factual information presented by the objectors was taken into account in determining that plaintiffs' counsel's requests were not justified under current standards, taking into consideration the risk of contingency, percentage award of the total recovery, and so on"); compare Visa Check/MasterMoney Antitrust Litigation, 297 F. Supp.2d at 523 (Class Counsel's efforts included "almost 400 depositions of witnesses, including 21 experts who issued 54 expert reports; four rounds of class certification briefing (through the Supreme Court); 16 summary judgment motions, 31 motions in limine and three Daubert motions; and a pretrial order identifying 230,000 pages of trial exhibits, 730 trial witnesses, and more than 17,000 deposition designations"). Nor were the objections particularly complex. See, e.g., Pentz Kessinger Fee Petition at 7 ("The objections put forth on behalf of the undersigned's clients were not overly complex."). To the contrary, the law regarding attorneys' fees in the class action settlement context is fairly well developed. See Anchor Securities Litigation, 2001 WL 53651, at *2 (objectors not entitled to attorney's fees for objecting to class counsel's request for attorney's fees where "[p]laintiffs' counsel sought a significant departure from the lodestar amount" and "[p]revailing case law in this area of which this Court was well aware determined that they were not entitled to it"); compare Visa Check/MasterMoney Antitrust Litigation, 297 F. Supp.2d at 523 ("As to complexity, Professor Harry First correctly describes the case as "a very complicated one, presenting, on virtually every legal point, unique issues with uncertain outcomes.").
The third factor — the risk of litigation — also does not weigh in favor of a multiplier. In my opinion, there was little chance that this Court would grant the request for $609 million and an extremely high chance that, as these Objectors urged, it would award a lesser amount. Moreover, unlike Constantine Partners — which "devoted 52% of its attorney and paralegal resources to this case" for over seven years, an investment of resources that "substantially impacted the firm's ability to staff other matters and to accept new profit-generating matters," Visa Check/MasterMoney Antitrust Litigation, 297 F. Supp.2d at 524 — none of these attorneys devoted more than three and one-half weeks to objecting to Lead Counsel's fee petition.
J. Scott Kessinger, Esq., and John Pentz, Esq., contend that, "[a]s attorneys who devote a substantial portion of their practices to representation of absent class members, [they] undertake substantial risk in representing their clients" because "[f]ewer than 33% of all objections [that they have filed] result in compensation for counsel." Pentz Kessinger Fee Petition at 4. However, as stated in the text, in my opinion, there was little chance that this Court would grant the request for $609 million. Moreover, in contrast to Constantine Partners, P.C., these two lawyers together billed only 99 attorney hours to their objections in this case — the approximately equivalent of a single lawyer working full time for only two and one-half weeks. Given their minimal investment of time, I do not consider their decision to object in this case to be a particularly risky one.
The fourth factor is the quality of the representation. As already stated, in my opinion, this Court would have reduced the fee award even in the absence of these Objectors' comments. See Goldberger, 209 F.3d at 55 ("[T]he quality of representation is best measured by results."); Independent Energy Holdings PLC Securities Litigation, 2003 WL 22801724, at *1 (no multiplier in case where court "would likely have reached the same result, with or without objectors' comments"). Nor did these Objectors present factual information bearing on the question of whether Lead Counsel's fee request was reasonable under prevailing law. See Anchor Securities Litigation, 2001 WL 53651, at *2 ("No factual information presented by the objectors was taken into account in determining that plaintiffs' counsel's requests were not justified under current standards, taking into consideration the risk of contingency, percentage award of the total recovery, and so on."). It seems likely that, at most, these non-frivolous objections served to "sharpen the court's focus," id. — a contribution that, though certainly of some value, should not be overstated.
The fifth factor is the relationship of the fee to the settlement. The settlement funds in this case, though extremely large, "particularly considering the injunctive relief," Visa Check/MasterMoney Antitrust Litigation, 297 F. Supp.2d at 524, were obtained as a result of the efforts of Class Counsel. By contrast, it is apparent to me that this Court would have reduced the fees with or without the contribution of these Objectors.
Last, public policy considerations do not weigh in favor of a multiplier. In my opinion, given the results they achieved, the award of any compensation at all to these Objectors is itself "sufficient inducement for lawyers to make similar efforts in the future." Id. (citing Goldberger, 209 F.3d at 51 ("There is . . . commendable sentiment in favor of providing lawyers with sufficient incentive to bring common fund cases that serve the public interest.")).
With the foregoing principles in mind, I turn to the individual fee requests:
Stacey Anne Mahoney, Esq., of Constantine Partners, P.C., collected and forwarded to me these Objectors' fee petitions, the filings that form the basis for these fee petitions, Lead Counsel's original fee request and supporting documents, and the transcript from the Fairness Hearing. She listed these filings to me on a declaration dated March 19, 2004 and a supplemental declaration dated March 25, 2004. Both of Ms. Mahoney's declarations were provided to counsel for the Objectors seeking fees. With the exception of correspondence addressed to me, in preparing this Report and Recommendation, I did not review any filings in this case that were not listed on Ms. Mahoney's Declarations.
A. 710 Corp. and Leonardo's Pizza by the Slice, Inc.
John F. Duane, Esq., N. Albert Bacharach Jr., Esq., and Paul S. Rothstein, Esq., appearing on behalf of Objectors 710 Corp. and Leonardo's Pizza by the Slice, Inc., filed a ten-page brief, dated September 5, 2003, objecting to the proposed Settlement Agreements. See Preliminary Objections to Proposed Settlement. Of those ten pages, only the following sentence addressed the issue of Class Counsel's fee request (id. at 9):
Objectors request the Court carefully consider the amount of attorneys' fees and expenses requested by class counsel, an issue which Objectors expressly reserve for further argument when the matter of fees is considered.
The foregoing attorneys also filed a one-page "Notice of Intention to Appear at Fairness Hearing," also dated September 5, 2003.
Both Mr. Duane and Edward H. Cochran, Esq., appeared at the Fairness Hearing on behalf of 710 Corp. and Leonardo's Pizza by the Slice, Inc., but only Mr. Cochran spoke. His comments, which covered approximately three transcript pages, were primarily addressed to the injunctive relief set forth in the proposed settlement agreements. As to the question of fees, he stated (Fairness Hearing Tr. at 58):
Your Honor, our objections contain matters as to the fee. I will not speak on that at all fully. I will incorporate the comments of other objectors so that they are not repeated.
Based upon the foregoing efforts, Mr. Duane, Mr. Bacharach, Mr. Rothstein, Mr. Cochran, and Frank H. Tomlinson, Esq. (who is not listed as counsel on any of the written submissions and who did not appear at the Fairness Hearing), seek an award of $2,915,323.77, which, they note, amounts to only three-quarters of one percent of the difference between Lead Counsel's request for $609,000,000.00 and the $220,290,160.44 that this Court awarded. Leonardo's Pizza by the Slice Fee Petition at 1. They contend that a fee of this magnitude is warranted because, "through objectors['] assistance in focusing the Court's attention on the extravagance of the requested fee, an enormous benefit has been conferred on the Class." Id. at 2.
In a supplement to their fee petition, Mr. Duane, Mr. Bacharach, Mr. Rothstein, Mr. Cochran and Mr. Tomlinson note that the foregoing award also is warranted because they were "[t]he only objectors who raised objections as to further notice for a) the system of distributing money remaining in the common fund, and b) the proceedings regarding the securitization of award." Counsel for Objectors 710 Corp. and Leonardo's Pizza by the Slice, Inc.'s, Supplement to Application for Attorney's Fees and Expenses at 1. They contend that the following paragraph from this Court's December 19, 2003 Opinion and Order makes clear that Lead Counsel adopted these suggestions:
Leonardo's Pizza also asserts that Class Counsel should publish on the Internet: (a) their system for distributing any money remaining in the common fund after distributions to absent Class Members; and (b) that any motion for securitization of the award be published on the case website. There is no controversy on this issue, as Lead Counsel have stated in their papers that they will do so.Visa Check/MasterMoney Antitrust Litigation, 297 F. Supp.2d at 518 n. 18.
Mr. Duane, Mr. Bacharach, Mr. Rothstein, Mr. Cochran and Mr. Tomlinson submit no time records to support their fee application, notwithstanding the fact that, in its December 19, 2003 Opinion and Order, this Court specifically stated that, "when the percentage method is used . . . the Second Circuit `encourage[s] the practice of requiring documentation of hours as a `cross-check' on the reasonableness of the requested percentage.'" Visa Check/MasterMoney Antitrust Litigation, 297 F. Supp.2d at 520-21 (quoting Goldberger, 209 F.3d at 50).
In my opinion, this Court should decline to award Mr. Duanc, Mr. Bacharach, Mr. Rothstein, Mr. Cochran and Mr. Tomlinson attorneys' fees, for three reasons:
First, in my opinion, an award of nearly $3 million as compensation for their minimal efforts opposing Lead Counsel's fee request would constitute a windfall. See id. at 521 (noting that "[t]he Second Circuit has cautioned district courts . . . not to blindly follow a one-size-fits-all `benchmark' in determining the appropriate fee" because "[s]uch a practice `could easily lead to routine windfalls where the recovered fund runs into the multi-millions'" (quoting Goldberger, 209 F.3d at 52)).
Second, the failure by these attorneys to submit any time records has made it impossible for this Court to calculate a reasonable fee as an alternative to their unreasonable request.See id. ("the key consideration in awarding fees is what is reasonable under the circumstances").
Third, the contribution of these attorneys on the subject of Lead Counsel's fee request was so insignificant that it would not merit an award of fees even if counsel had submitted their time detail. See White, 500 F.2d at 828 (objectors are "entitled to an allowance as compensation for attorneys' fees and expenses" if "a proper showing has been made that the settlement was improved as a result of their efforts"); City of Detroit v. Grinnell Corp., 560 F.2d 1093 (2d Cir. 1977) ("an attorney whose actions have conferred a benefit upon a given group or class of litigants may file a claim for reasonable compensation for his efforts"), abrogated on other grounds, Goldberger v. Integrated Resources, Inc., 209 F.3d 43 (2d Cir. 2000).
For the foregoing reasons, I respectfully recommend that this Court deny the fee petition submitted by Mr. Duane, Mr. Bacharach, Mr. Rothstein, Mr. Cochran and Mr. Tomlinson. This is a litigation, not a winning lottery ticket.
B. Rent Tech, Inc. and Rental Solutions, Inc.
John W. Davis, Esq., and Steven F. Helfand, Esq., appearing on behalf of Objectors Rent Tech and Rental Solutions, Inc., filed a fourteen-page brief, dated August 26, 2003, objecting to Lead Counsel's fee application. The objection primarily argued that Lead Counsel's request for attorneys' fees was excessive. Mr. Davis and Mr. Helfand both traveled from San Francisco, California to appear at this Court's Fairness Hearing. However, only Mr. Davis spoke at the hearing. (Fairness Hearing Tr. at 48-51). His presentation — which consumes approximately four transcript pages — consisted of a brief recitation of some of the points made in Rent Tech's written submission.
For the foregoing efforts, Mr. Davis and Mr. Helfand now seek compensation for 254.2 attorney hours — the equivalent of one attorney working full time for nearly six and one-half weeks — at a rate of $375 per hour, for a lodestar total of $95,325.00. They further request a multiplier of 2.0. Finally, they seek compensation for $2434.73 in expenses, for a total requested award of $193,084.73. See Rent Tech Fee Petition at 7.
In my opinion, Mr. Davis and Mr. Helfand are secking compensation for an excessive and unreasonable number of attorney hours. I therefore respectfully recommend that this Court award exclude some of the hours for which they seek compensation, see, e.g., Luciano, 109 F.3d at 116 ("a district court can exclude excessive and unreasonable hours from its fee computation by making an across-the-board reduction in the amount of hours"), as follows:
According to their time records, Mr. Davis and Mr. Helfand devoted 201.6 hours — the equivalent of one attorney working full time for five weeks — to meeting with their clients, researching and drafting their 14-page written submission and preparing for Mr. Davis' brief appearance at the Fairness Hearing. See Billing and Expense Records, Ex. A to Rent Tech Fee Petition (recording 201.6 hours prior to September 24, 2003 flight to Brooklyn for September 25, 2003 Fairness Hearing). In my opinion, 201.6 hours exceeds what was reasonably required to accomplish those tasks. Accordingly, I respectfully recommend that Mr. Davis and Mr. Helfand be compensated for only thirty of those hours.
The remaining 52.6 hours consist of time that Mr. Davis and Mr. Helfand spent (1) traveling to and from the Fairness Hearing (15.5 hours each, for a total of 31 hours); (2) attending the Fairness Hearing (3.5 hours each, for a total of 7 hours); (3) reviewing correspondence from Class Counsel regarding Objectors' arguments (0.2 hours); (4) reviewing and researching this Court's December 19, 2003 Opinion and Order (a combined total of 7.5 hours); and (5) preparing this fee petition (a combined total of 6.9 hours). See Billing and Expense Records, Ex. A to Rent Tech Fee Petition.
Given that only Mr. Davis spoke at the Fairness Hearing, there was, in my opinion, no need for Mr. Helfand to attend. See Luciano, 109 F.3d at 117 (it is "within the purview of the [district] court's discretion to determine whether or not the actual time expended by an additional attorney [is] reasonable"). I also do not believe that it was necessary for Mr. Davis and Mr. Helfand to devote a combined total of 7.5 hours — the equivalent of one attorney working full time for nearly an entire day — to reviewing and researching this Court's December 19, 2003 Opinion and Order. Moreover, in the common fund context, attorneys are not entitled to fees for their work requesting fees. See, e.g., Savoie v. Merchants Bank, 166 F.3d 456, 461 (2d Cir. 1999) ("Where the fees will be drawn from a common fund, we have held that counsel is not entitled to fees for seeking fees, on the theory that `the fund, created for the benefit of a group or class, which already has been diminished by an award of fees, should not be further diminished by an additional award for work performed in the fee application.'" (quoting Mautner v. Hirsch, 32 F.3d 37, 39 (2d Cir. 1994)). Finally, in my opinion, Mr. Davis should be compensated at half of his hourly rate for his travel time. See Paulino, 1999 WL 32536, at *3 (different rates can be set for "court appearances and depositions, office time and travel time"). I therefore respectfully recommend Mr. Davis and Mr. Helfand be compensated for only 3.7 of the above-described hours at the hourly rate of $350, and 15.5 of the above-described hours at one-half of that rate.
Mr. Davis and Mr. Helfand also seek compensation for $2,434.73 in expenses. Of that amount, $1221.11 was spent on Mr. Helfand's travel costs in connection with his appearance at the Fairness Hearing, and the remainder was spent on Mr. Davis' travel costs and the pro hac vice applications and associated fees of both Mr. Davis and Mr. Helfand As stated above, I do not believe that it was necessary for Mr. Helfand to attend the Fairness Hearing. Accordingly, I respectfully recommend that Mr. Davis and Mr. Helfand be compensated for all of their expenses except for Mr. Helfand's travel costs, for a total reimbursement of $1213.62. See Reichman v. Bonsignore, Brignati Mazzotta, P.C., 818 F.2d 278, 283 (2d Cir. 1987) (attorneys may be compensated for reasonable out-of-pocket expenses that are "incidental and necessary" to representation (internal citation marks omitted));Visa Check/MasterMoney Antitrust Litigation, 297 F. Supp.2d at 525 ("I see no reason to depart from the common practice in this circuit of granting expense requests.").
The original fee application sought compensation for $4869.46 in expenses, $2442.21 of which was attributed to Mr. Helfand's travel expenses. In a supplemental submission, Mr. Helfand informed the Court that the request for $4869.46 "erroneously factored in the requested multiplier of 2.0" and therefore that the "correct amount of expenses for which reimbursement is sought totals [half that amount, or] $2434.73." Helfand's Jan. 7, 2004 Letter to the Honorable John Gleeson. By my calculation, half of Mr. Helfand's travel bill of $2442.21 is $1221.105. It is not clear to me how Mr. Helfand was able to spend the half penny. Accordingly, I have rounded his travel expenses up to $1221.11 and, for the reasons stated in the text, deducted that amount from the total expense calculation of $2,434.73.
For the foregoing reasons, I respectfully recommend that this Court award Mr. Davis and Mr. Helfand compensation for 33.7 hours of attorney time at a rate of $350 per hour, plus 15.5 travel hours at an hourly rate of $175, for a lodestar total of $14,507.50. I further respectfully recommend that Mr. Davis and Mr. Helfand be compensated for $1213.63 in expenses, for a combined total of $15,721.13.
C. Sound Deals, Inc., Digital Playroom, Inc., Duke Products, Inc., Southern Network Services, Inc., and Village Fabrics and Furnishings, Inc.
R. Stephen Griffis, Esq., appearing on behalf of Objectors Sound Deals, Inc., and Digital Playroom, Inc., filed (1) a three-page "Objection" critiquing the Settlement Agreements and Lead Counsel's fee application; (2) a "Notice of Motion, Intention to Appear and Filing"; and (3) a motion for admission pro hac vice and related papers — all dated September 3, 2003. Kearney Dee Hutsler, Esq., appearing on behalf of Objectors Duke Products, Inc., and Southern Network Services, Inc., filed substantially similar papers dated September 4, 2003. Charles M. Thompson, Esq., appearing on behalf of Objector Village Fabrics and Furnishings, Inc., filed a three-page "Objection" substantially similar to the "Objections" filed by Mr. Griffis and Mr. Hutsler, but no motion for pro hac vice admission.
In their September 18, 2003 response to the objections to their fee request, Lead Counsel asserted that "virtually all of the objections to Class Counsel's fee request have been filed by `professional objectors who seek out class actions to simply extract a fee by lodging generic unhelpful protests.'" Response to Fee Objections at 5 (quoting Shaw v. Toshiba Am. Info, Sys., Inc., 91 F. Supp.2d 942, 973 (E.D. Tex. 2000)). As support for this assertion, Class Counsel noted, among other things, that the court in Shaw had chastised Mr. Hutsler and Mr. Thompson for filing "obviously `canned' objections." Id. at 8.
Thereafter, Mr. Griffis, Mr. Hutsler and Mr. Thompson filed a consolidated thirteen-page brief, dated September 19, 2003, in support of their objections. See Consolidated Memorandum Brief in Support of Objections of Sound Deals, Inc., Digital Playroom, Inc., Duke Products, Inc., Southern Network Services, Inc., and Village Fabric and Furnishings, Inc. Approximately nine of the thirteen pages discussed Lead Counsel's request for attorneys' fees, the Settlement Agreements, and the plan of allocation. The remaining four pages consisted of a defense of their work as objectors' counsel in other class actions, including Shaw.
Mr. Griffis traveled from Birmingham, Alabama to appear at this Court's Fairness Hearing on behalf of his clients and the clients of Mr. Hutsler and Mr. Thompson. Mr. Griffis' presentation at the hearing — which takes up approximately 4 transcript pages (Fairness Hearing Tr. at 61-64) — was a brief recitation of some of the points made in the written submissions.
Mr. Griffis seeks compensation for 44.65 attorney hours, at a rate of $300 per hour, for a total of $13,395.00. He further requests a multiplier of 3.5. Finally, he seeks compensation for $960.07 in expenses, for a total requested award of $193,084.73.See Sound Deals Digital Playroom Fee Petition at 8; Time of R. Stephen Griffis in Visa/MasterMoney, Attachment to Sound Deals Digital Playroom Fee Petition.
Without explanation, Mr. Griffis submitted two fee petitions, one dated December 30, 2003, and one dated February 5, 2004, which, apart from bearing different dates, appear otherwise identical to me.
Mr. Hutsler seeks attorney fees "to be determined by the Court." Application for Representative Fee, Attorney's Fees and Expenses ("Duke Pro Southern Network Services Fee Petition") at 5. According to Mr. Hutsler, he devoted 41.1 attorney hours to his representation of Objectors Duke Products, Inc., and Southern Network Services, Inc., at a rate of $300 per hour (his "hourly rate on these types of cases), for a total lodestar amount of $12,330.00. He also asserts that he spent $50.44 in expenses. See id. at 4; Time and Expenses of Kearney Dee Hutsler, Attachment to Duke Pro Southern Network Services Fee Petition.
Mr. Hutsler states that his total time was 38.1 hours. However, when I add up each of his individual time entries, I get a total of 41.1 hours.
Mr. Thompson seeks compensation for 14.10 attorney hours, at a rate of $395 per hour, for a total of $5569.50. He further requests a multiplier of 3.5, for a total requested award of $19,493.25. See Fee Application for Objectors Counsel ("Village Fabrics Fee Petition") at 1.
Mr. Thompson submitted two fee petitions: the first was dated December 31, 2003, and the second was dated February 5, 2004. The second petition contained a discussion of the law not present in the first.
In my opinion, Mr. Griffis, Mr. Hutsler and Mr. Thompson are seeking compensation for an excessive number of attorney hours. Accordingly, I respectfully recommend that this Court award compensation based upon a reduced number of hours, see Luciano, 109 F.3d at 116 ("a district court can exclude excessive and unreasonable hours from its fee computation by making an across-the-board reduction in the amount of hours"), as follows:
All three attorneys, as well as John H. Pentz, have "move[d] the Special Master for an Evidentiary Hearing for their application for attorney fees." See Objectors' Motion for Evidentiary Hearing. I do not consider an evidentiary hearing to be necessary. Accordingly, this motion is denied.
First, Mr. Thompson's time records reveal that he devoted 1.2 hours to reviewing Mr. Griffis' "research on local rules regarding New York admission" and "contacting New York attorneys." Time of Charles M. Thompson in Visa Credit Card Case, attachment to Village Fabrics Fee Petition. Because Mr. Griffis did not file a motion for pro hac vice admission, I respectfully recommend that this time be excluded.
The time records of all three attorneys reveal that they devoted a combined total of 87.55 hours — the equivalent of one attorney working full time for approximately two weeks and one day — to meeting with their clients, researching, preparing and filing their substantially similar three-page "Objections" and motions for pro hac vice admission (none of which cited a single case), researching, preparing and filing their thirteen-page consolidated brief, and reviewing case-related material. I believe this work could have been accomplished in one-third of that time. Accordingly, I respectfully recommend that, in connection with the foregoing efforts, Mr. Griffis be compensated for 12.22 hours of the 36.65 hours that he spent, that Mr. Hutsler be compensated for 12.67 of the 38 hours that he spent, and that Mr. Thompson be compensated for 4.3 of the 12.9 hours that he spent.
After the consolidated brief was filed, Mr. Griffis billed 8.0 hours in connection with his travel to and from, and appearance at, the Fairness Hearing. In my opinion, that number is reasonable and does not merit reduction. However, I respectfully recommend that this Court award compensation for the time that Mr. Griffis spent traveling to and from the Fairness Hearing at half of his usual hourly rate. See Paulino, 1999 WL 32536, at *3 (different rates can be set for "court appearances and depositions, office time and travel time"). Mr. Griffis' time detail does not indicate how much of the 8.0 hours he spent at the hearing and how much he spent traveling. Nevertheless, other objectors' counsel indicated that the hearing lasted between three and three and one-half hours. See, e.g., Statement of Hours and Expenses to Date in Visa Check/MasterMoney Antitrust Litigation, Attachment to Pentz Affidavit (3.0 hours for attending Fairness Hearing); Billing and Expense Records, Ex. A to Rent Tech Fee Petition (3.5 hours). Accordingly, I respectfully recommend that this Court estimate Mr. Griffis' travel time at 4.75 hours.
Mr. Hutsler, who did not travel to Brooklyn for the Fairness Hearing, billed an additional 3.1 hours after the filing of the consolidated brief, time that he says he spent: (1) discussing the hearing with Mr. Griffis (although Mr. Griffis does not seek compensation for any such discussions) (0.5 hours); (2) reviewing this Court's December 19, 2003 Opinion and Order and preparing this fee petition (1.5 hours); and (3) "[c]onferenc[ing] with attorney Griffis" (although, again, Mr. Griffis does not seek compensation for any such conferences), "checking Settlement website for ruling" and "downloading ruling" (1.1 hours). In my opinion, this Court should decline to award compensation for this time. See, e.g., Savoie, 166 F.3d at 461 ("Where the fees will be drawn from a common fund, we have held that counsel is not entitled to fees for seeking fees, on the theory that `the fund, created for the benefit of a group or class, which already has been diminished by an award of fees, should not be further diminished by an additional award for work performed in the fee application.'" (quoting Mautner v. Hirsch, 32 F.3d 37, 39 (2d Cir. 1994)).
In addition to the foregoing, Mr. Griffis requests compensation for $960.07 in expenses, which covers his copying, filing and mailing fees as well as his travel expenses in connection with his appearance at the Fairness Hearing. I respectfully recommend that this Court authorize reimbursement of these expenses with the exception of the $133.39 that Mr. Griffis spent on travel meals, for a total of $826.68. See Reichman, 818 F.2d at 283;Visa Check/MasterMoney Antitrust Litigation, 297 F. Supp.2d at 525.
Mr. Hutsler requests compensation for $50.44 in expenses, to cover his costs in mailing and filing the motion for pro hac vice admission. In my opinion, these expenses were "incidental and necessary" to the representation, and I therefore respectfully recommend that this Court authorize reimbursement of the entire amount. See Reichman, 818 F.2d at 283; Visa Check/MasterMoney Antitrust Litigation, 297 F. Supp.2d at 525.
For the reasons set forth above, I respectfully recommend that (1) Mr. Griffis be compensated for 15.47 hours of attorney time at an hourly rate of $300, plus 4.75 hours of travel time at $150 and an additional $826.68 in expenses, for a combined total of $6180.18; (2) Mr. Hutsler be compensated for 12.67 hours of attorney time at an hourly rate of $300, plus an additional $50.44 in expenses, for a combined total of $3851.44; and (3) Mr. Thompson be compensated for 4.3 hours of attorney time at an hourly rate of $350, for a lodestar total of $1505.
D. Kickers Corner of the Americas, Inc., Round House Inc., Ron Fred, Inc., and Ron Jen, Inc.
John H. Pentz, Esq., appearing on behalf of Round House Inc., doing business as Smuggler's Cove, Ron Fred, Inc., doing business as Bailey's, and Ron Jen, Inc., doing business as The Boathouse, filed a Notice of Appearance and an eleven-page brief, dated September 2, 2003, describing Lead Counsel's requested fee as a "windfall that may in fact test the limits of the ethical canons" and suggesting, instead, that Class Counsel be awarded a fee of either ten percent of the common fund or their lodestar with a multiplier of five. Objection to Class Action Settlement and Attorney's Fee request of Round House, Inc. d/b/a Smuggler's Cover, et al., at 1, 11. J. Scott Kessinger, Esq., appearing on behalf of Objector Kickers Corner of the Americas, Inc., filed a Notice of Intention to Appear and a seven-page brief, dated September 4, 2003, contending that the "requested fee of 18% of the valuation of the settlement is grossly excessive" and requesting further discovery regarding the alleged risk taken by Class Counsel. Objection and Notice of Intention to Appear of Class Member Kickers Corner of the Americas, Inc., at 1, 6-7.
After filing their separate briefs, Mr. Pentz and Mr. Kessinger coordinated their efforts "to avoid duplication of effort and to maximize efficiency." Affidavit of John Pentz in Support of Fee Petition ("Pentz Affidavit") ¶ 2. Thus, Mr. Pentz traveled from Boston to "attend the fairness hearing and present arguments by [his] clients and by Mr. Kessinger's client, while Mr. Kessinger reviewed the voluminous material filed and served upon objectors during the weeks before the fairness hearing, and directed [Mr. Pentz'] attentions to the most germane portions of that material." Id. Mr. Pentz' presentation at the Fairness Hearing, which consumed approximately seven transcript pages, addressed the issue of fees. Fairness Hearing Tr. at 51-58.
This Court took the objection of Kickers Corner on submission. Fairness Hearing Tr. at 13.
Mr. Pentz and Mr. Kessinger have informed this Court that, because their representations in this case were contingent, they have yet to receive any compensation in this matter. Pentz Affidavit ¶ 4; Kessinger Affidavit ¶ 3. Accordingly, they have filed a joint fee petition seeking a fee award that "adequately recognizes the magnitude of the benefit conferred upon the class in this case, that compensates counsel for the risk undertaken in this and other cases, and that sufficiently provides an incentive to counsel to continue to undertake representation of unnamed class members on a contingent fee basis." Pentz Kessinger Fee Petition at 10. They point out that "one-tenth of one percent of the amount saved for the benefit of the class is $389,000" — a number that, they maintain, "will barely register to the right of the decimal point" when considered "[i]n relation to the size of the benefit conferred upon the class." Id. at 8. In addition, Mr. Pentz notes that he spent 41.5 attorney hours, which, applying his usual hourly rate of $350, would result in a total lodestar amount of $14,525. Mr. Pentz also seeks compensation for travel expenses of $416. Pentz Affidavit ¶ 3. Mr. Kessinger notes that he devoted 57.4 attorney hours to this case, which, applying his usual hourly rate of $275, would yield a lodestar of $15,785.00. Kessinger Affidavit ¶ 2.
Mr. Pentz and Mr. Kessinger acknowledge that "a fee award of $389,000 would represent a 12.8 multiplier of their lodestars prior to January 2, 2004," and they maintain that, "if it were not for the fact that Lead Counsel has filed a notice of appeal of Judge Gleeson's $220 million fee award, they would not ask for $389,000." Reply Memorandum in Support of Fee Petition of John J. Pentz and J. Scott Kessinger at 7. However, "[b]ecause Pentz and Kessinger's clients will now have to incur the time and expense of defending Lead Counsel's audacious appeal, Pentz and Kessinger anticipate that their final lodestars in this case will be closer to $75,000 than $30,000"; accordingly, they maintain, "[a] fee award of $389,000 would . . . represent a lodestar multiplier of only 5.18." Id. at 8.
As stated above, in my opinion, the lodestar method is the more appropriate method for calculating Mr. Pentz' and Mr. Kessinger's attorneys' fees. Moreover, I am not persuaded by the argument that Mr. Pentz and Mr. Kessinger are entitled to compensation now for appellate work they may or may not do in the future.Compare Cush-Crawford v. Adchem Corp., 234 F. Supp.2d 207 (E.D.N.Y. 2002) (discussing procedure for requesting appellate attorney fees in Title VII action).
In a March 20, 2004 letter, Mr. Pentz cites In re NASDAQ Market-Makers Antitrust Litig., 187 F.R.D. 124, 129 (S.D.N.Y. 1999), as "support for their estimation of the amount of legal work they will do defending class counsel's fee" on appeal. Pentz' Mar. 20, 2004 Letter to Special Master. In NASDAQ, 187 F.R.D. at 127-29, the court, acting pursuant to Federal Rule of Appellate Procedure 7, ordered a class member whose "apparent intent [was] to use this class action as a vehicle to litigate his unrelated 25 year old claims" to file an appeal bond in the amount of $101,500-$50,000 of which was to cover "attorney's fees on appeal" — on the ground that his proposed appeal was "objectively unreasonable" and would only serve to "waste" the settlement fund. Whether or not NASDAQ stands for the proposition that, "in this Circuit, the amount of anticipated attorney's fees necessary to defend an appeal is presumptively $50,000" (Pentz' Mar. 20, 2004 Letter to Special Master), it does not support the proposition that Mr. Pentz and Mr. Kessinger should be paid now for appellate work they anticipate doing in the future.
As noted, Mr. Pentz devoted 41.5 attorney hours to the objections in this case. Lead Counsel argue that Mr. Pentz should not be compensated for the 1.5 of those hours that Mr. Pentz spent on "numerous t/c/w counsel for Saragians" because Saragians is not an objector in this case. Opposition at 6 n. 10. Mr. Pentz does not respond to this argument in his reply. Accordingly, I respectfully recommend that, as Lead Counsel request, this Court decline to compensate Mr. Pentz for this time.
Mr. Pentz spent the remaining forty hours (1) reviewing case-related materials and researching and drafting his objection (24 hours); (2) making travel arrangements and traveling to and from the Fairness Hearing (12 hours); (3) attending the Fairness Hearing; and (4) drafting a letter to this Court regarding recent authority bearing on his objection (1.0 hours). In my opinion, these numbers are reasonable, and do not merit reduction. Accordingly, I respectfully recommend that this Court award Mr. Pentz compensation for 28 hours of attorney time at his usual hourly rate of $350, plus 12 hours of travel time at half of his usual hourly rate, or $175, see Paulino, 1999 WL 32536, at *3 (different rates can be set for "court appearances and depositions, office time and travel time"), for a total lodestar of $11,900. In addition, in my opinion, Mr. Pentz is entitled to reimbursement for his travel expenses of $416, which were "incidental and necessary" to the representation. See Reichman, P.C., 818 F.2d at 283; Visa Check/MasterMoney Antitrust Litigation, 297 F. Supp.2d at 525.
Mr. Kessinger seeks compensation for 57.4 attorney hours — the equivalent of an attorney working full time for nearly one and one-half weeks — which he spent researching and drafting his seven-page objection and reviewing related materials in preparation for Mr. Pentz' appearance at the Fairness Hearing. In my opinion, this work could have been accomplished in 25 hours, particularly given the brevity of Mr. Kessinger's written submission. See Luciano, 109 F.3d at 116 ("a district court can exclude excessive and unreasonable hours from its fee computation by making an across-the-board reduction in the amount of hours").
As Lead Counsel note, Mr. Kessinger "provides no dates for the work he claims to have done on behalf of his client objector." Opposition at 6 n. 10. I consider that to be further justification for reducing the number of attorney hours for which Mr. Kessinger is compensated to 25. See United State Football League v. National Football League, 887 F.2d 408, 415 (2d Cir. 1989) (approving a percentage reduction of total fee award to account for vagueness in documentation of certain time entries).
For the reasons set forth above, I respectfully recommend that (1) Mr. Pentz be compensated for 28 attorney hours at his usual hourly rate of $350, plus twelve travel hours at half of his usual rate, for a total lodestar amount of $11,900, which, together with his travel expenses of $416, yields a combined total of $12,316; and (2) Mr. Kessinger be compensated for 25 attorney hours at his usual hourly rate of $275, for a total lodestar amount of $6875.
E. Roman Buholzer
On October 2, 2002, Lawrence W. Schonbrun, Esq., on behalf of Objector Roman Buholzer d/b/a The Continental Garden Restaurant, filed a Notice of Appearance of Additional Class Member. Thereafter, he filed a thirty-page brief, dated September 4, 2003, approximately four pages of which objected to the size of Lead Counsel's fee request. See Objection and Notice of Intention to Appear and Be Heard on Proposed Settlement, Plan of Allocation, and Petition for Award of Attorney's Fees and Costs and Expenses at 19-22. The remainder of Mr. Schonbrun's objections did not meet with success.
See Visa Check/MasterMoney Antitrust Litigation, 297 F. Supp.2d at 522 n. 28 (declining Buholzer's request for the appointment of a class guardian, an auditor, a fee expert and a special master); id. at 520 (rejecting Buholzer's objection to "Lead Counsel's purported unfettered discretion in accepting or rejecting late claims for relief by Class members"); id. at 520 n. 23 (rejecting Buholzer's claims that (1) "millions of small merchants will be unable to `submit appropriate information to the Claims Administrator'" and (2) the plan of allocation "should not require the administrator to submit its reports on Class members' approved claims under seal"); id. at 525 n. 34 (rejecting Buholzer's claim that attorneys' fees should be calculated on the net recovery to the Class, excluding costs and expenses).
By letter dated September 17, 2003, Mr. Schonbrun filed an amended brief that incorporated stylistic changes but did not cite any additional authorities. See Schonbrun's Sep. 17, 2003 Letter to Robert C. Heinemann at 1.
As noted above, in their response to the objections to their fee request, Class Counsel asserted that "virtually all of the objections to Class Counsel's fee request have been filed by `professional objectors who seek out class actions to simply extract a fee by lodging generic unhelpful protests.'" Response to Fee Objections at 5 (quoting Shaw v. Toshiba Am. Info. Sys., Inc., 91 F. Supp.2d 942, 973 (E.D. Tex. 2000)). Class Counsel described Mr. Schonbrun as one of "the most notorious professional objectors appearing in this case" and noted that he had been chastised for his conduct as objectors' counsel in three different cases. See Response to Fee Objections at 5-7 (citingShaw, Scott v. Blockbuster Inc., No. D 162-535, 2001 WL 1763966, at *2 (Tex Dist. Dec. 21, 2001), and In re Holocaust Victim Assets, 96-CV-4849 (E.D.N.Y. Jan. 5, 2001)).
In response to the foregoing, Mr. Schonbrun filed a supplemental submission, dated September 23, 2003, arguing that Class Counsel's "numerous attacks on objector's counsel . . . paint an incomplete and unfair picture of his efforts in the class action field over the last decade" and seeking permission to file an attached declaration that "more accurately describes the achievements and accomplishments of objector's counsel to improve the functioning of the class action mechanism." Request to File Supplemental Pleading at 1.
Mr. Schonbrun traveled from San Francisco, California to attend the Fairness Hearing. His presentation, which occupies approximately ten transcript pages, reiterated several of the points made in his written submission. Fairness Hearing Tr. at 34-43.
Mr. Schonbrun's fee petition seeks compensation for 39.5 attorney hours, plus 18 hours of travel time. He requests an hourly rate in the range of "$350 per hour and $550 per hour (depending on the hourly rates awarded to other objectors' counsel)." Schonbrun Feb. 5 Declaration ¶ 19(a). Moreover, in calculating his lodestar, he "included travel at both [his] regular hourly rate and at a rate of 50 percent of that." Id. ¶ 21.
Mr. Schonbrun's initial fee petition was dated January 7, 2004 and estimated that the number of hours he devoted to this case was 55. His second set of papers, dated February 5, 2004, provided his time records and sought compensation for 39.5 attorney hours and 18 travel hours.
Given that most of Mr. Schonbrun's objections met with failure, I respectfully recommend that Mr. Schonbrun be compensated for only ten attorney hours, plus eighteen travel hours. See Luciano, 109 F.3d at 116 ("a district court can exclude excessive and unreasonable hours from its fee computation by making an across-the-board reduction in the amount of hours");White, 500 F.2d at 828 (objectors are "entitled to an allowance as compensation for attorneys' fees and expenses" if "a proper showing has been made that the settlement was improved as a result of their efforts"); see also Independent Energy Holdings, 2003 WL 22801724, at *2 (reducing number of hours where "objections were fairly boilerplate and routine" and "this was not the first time these counsel have appeared for objectors and raised nearly identical objections").
As Lead Counsel note, Mr. Schunbrun, like Mr. Kessinger, "provides no dates for the work he claims to have done on behalf of his client objector." Opposition at 6 n. 10. Again, I consider that failure to be further justification for reducing the number of attorney hours for which Mr. Schonbrun is compensated.
Mr. Schonbrun also requests reimbursement for $1581.05 in expenses, which covers postage, photocopying, faxes and travel costs. See Attachment to Schonbrun Declaration. I agree with Lead Counsel that Mr. Schonbrun's request for $223 for "[t]ransportation to and from airport/hotel/court" is excessive, and respectfully recommend that he be reimbursed for half of that amount, or $111.50. I also respectfully recommend that Mr. Schonbrun not be compensated for the $52.68 that he spent on "[t]ravel meals." Accordingly, I respectfully recommend that this Court authorize reimbursement of Mr. Schonbrun's expenses in the amount of $1416.87. See Reichman, 818 F.2d at 283; Visa Check/MasterMoney Antitrust Litigation, 297 F. Supp.2d at 525
For the foregoing reasons, I respectfully recommend that Mr. Schonbrun be compensated for ten attorney hours at the hourly rate of $350, plus eighteen travel hours at the hourly rate of $175, which, together with his expenses of $1416.87, yields a combined total of $8,066.87.
II. Representative Award
On behalf of Objectors Duke Products, Inc., Southern Network Services, Inc., Mr. Hutsler seeks a representative award of $1000. See Duke Pro Southern Network Services Fee Petition at 3. In support of this request, Mr. Hutsler states that his clients "have each spent less than two hours working on the case in a representative capacity, primarily involved in the initial consultation and thereafter receiving updates from counsel."Id. Mr. Hutsler's time records indicate that he spent one-half of one hour with one client and nine-tenths of one hour with the other. See Time and Expenses of Kearney Dee Hutsler, Attachment to Duke Pro Southern Network Services Fee Petition.
I do not believe that such a minimal investment of time, unaccompanied by any other indication of sacrifice, warrants the award of a representative fee. Cf. Sheppard v. ConEd, No. 94-CV-403, 2000 WL 33313540, at *5 (E.D.N.Y. Dec. 21, 2000) (Gleeson, J.) ("taking time away from work to respond to discovery requests and to be deposed are among the `normal obligations of class representation'" (quoting Weseley v. Spear. Leeds Kellogg, 711 F. Supp. 713, 720 (E.D.N.Y. 1989) (Nickerson, J.)). I therefore respectfully recommend that this Court deny Mr. Hutsler's request, on behalf of his clients, for a representative fee.
CONCLUSION
For the reasons stated above, I respectfully recommend that this Court:
(1) deny the fee petition submitted by John F. Duane, Esq., N. Albert Bacharach Jr., Esq., Paul S. Rothstein, Esq., and Frank H. Tomlinson, Esq., counsel for Objectors 710 Corp. and Leonardo's Pizza by the Slice, Inc.;
(2) award John W. Davis, Esq., and Steven F. Helfand, Esq., counsel for Objectors Rent Tech, Inc., and Rental Solutions, Inc., $15,721.13, representing compensation for 33.7 hours of attorney time at a rate of $350 per hour, plus 15.5 travel hours at an hourly rate of $175.00, plus reimbursement for $1213.63 in expenses;
(3) award R. Stephen Griffis, Esq., counsel for Objectors Sound Deals, Inc., and Digital Playroom, Inc., $6180.18, representing compensation for 15.47 hours of attorney time at an hourly rate of $300, plus 4.75 hours of travel time at $150, plus reimbursement for $826.68 in expenses;
(4) award Kearney Dee Hutsler, Esq., counsel for Objectors Duke Products, Inc., and Southern Network Services, Inc., $3851.44, representing compensation for 12.67 hours of attorney time at an hourly rate of $300, plus reimbursement for $50.44 in expenses;
(5) Charles M. Thompson, Esq., counsel for Objector Village Fabrics and Furnishings, Inc., $1505, representing compensation for 4.3 hours of attorney time at an hourly rate of $350;
(6) award John H. Pentz, Esq., counsel for Objectors Round House Inc., Ron Fred, Inc., Bailey's, and Ron Jen, Inc., $12,316, representing compensation for 28 attorney hours at an hourly rate of $350, plus twelve travel hours at an hourly rate of $175, plus reimbursement for $416 in expenses;
(7) award J. Scott Kessinger, Esq., counsel for Objector Kickers Corner of the Americas, Inc., $6875, representing compensation for 25 attorney hours at an hourly rate of $275;
(8) award Lawrence W. Schonbrun, Esq., counsel for Objector Roman Buholzer, $8,066.87, representing compensation for ten attorney hours at the hourly rate of $350, plus eighteen travel hours at the hourly rate of $175, plus reimbursement of $1416.87 in expenses; and
(9) deny Mr. Hutsler's request for a representative fee for his clients, Objectors Duke Products, Inc., and Southern Network Services, Inc.
Pursuant to Paragraph (g) of Judge Gleeson's February 17, 2004 Order, the parties have "ten business days, following service, to file objections to the Special Master's report and recommendation with the Court."