awarded in other class actions in which the recoveries exceeded $ 100 million; (3) the factors reflecting the quality of class counsel's service to the class; (4) the fee percentage that would have been negotiated in this case were it the subject of a private contingent fee agreement negotiated at the time of engagement; and (5) a cross-check against the lodestar of the conclusions reached under the percentage-of-recovery method.
1. Effect of the Size of the Recovery
The size of the recovery is a factor for consideration in establishing the percentage of recovery. See SmithKline, 751 F. Supp. at 534 ("the percentage of recovery fee should decrease as the size of the common fund increases"). Some courts have implemented a sliding scale, "allowing recovery of a given percentage of a certain amount of the fund, and decreasing percentages of subsequent amounts." FJC Fees at 69 (citing In re Fidelity Bancorp. Sec. Litig., 750 F. Supp. 160, 163 (D.N.J. 1990) (awarding 30% of the first $ 10 million, 20% of the next $ 10 million and 10% of any recovery beyond $ 20 million)). Consequently, although courts have identified the appropriate percentage range in common fund cases as anywhere from 20-30%, some reduction is appropriate in this case where the recovery will equal at least $ 410 million. Compare In re U.S. Bioscience Sec. Litig., 155 F.R.D. 116, 120 (E.D. Pa. 1994) (awarding fees of 30% of the settlement amount) and SmithKline, 751 F. Supp. at 531-34 (awarding as fees 25% of the recovery, and noting that "Courts have allowed attorney compensation ranging from 19 to 45% of the settlement fund created") with cases cited immediately infra (discussing attorneys' fee awards in class actions with settlement funds of at least $ 100 million).
2. Percentages Awarded in Other Class Actions with Recoveries of $ 100 Million or More
A review of fee awards to class counsel in cases where the recovery was $ 100 million or more reveals a range of percentages from 4.1% to 17.92%, excluding from the award any reimbursement of expenses. See, e.g., In re Baldwin-United Corp. Litig., 1986 WL 12195 (S.D.N.Y. 1986) ($ 183.8 million settlement fund; 4.1% fee award); In re Washington Power Supply Sys. Sec. Litig., 19 F.3d 1291, 1297, 1301 (9th Cir. 1994) ($ 687 million settlement fund; 4.658% fee award reversed and remanded because district court abused its discretion in refusing to award a risk multiplier; court indicated that a greater award was appropriate); In re "Agent Orange" Prod. Liab. Litig., 611 F. Supp. 1296 (E.D.N.Y. 1985) ($ 180 million settlement fund; 5.5% fee awarded); In re Folding Carton Antitrust Litig., 84 F.R.D. 245 (N.D. Ill. 1979) ($ 200 million settlement fund; 6.6% fee award); In re MGM Grand Hotel Fire Litig., 660 F. Supp. 522 (D. Nev. 1987) ($ 205 million settlement fund; 7% fee award); Bowling, 922 F. Supp. at 1283-84 ($ 102.5 million settlement fund; 10% fee award plus separate award of up to 10% of all future contributions to settlement fund); Sioux Nation of Indians v. United States, 227 Ct. Cl. 404, 650 F.2d 244, 247 (Ct. Cl. 1981) ($ 106 million settlement fund; 10% fee award); Stender v. Lucky Stores, Inc., No. 88-cv-1467 (N.D. Cal. Apr. 20, 1994) ($ 107 million settlement; fees and costs consumed 12.8% of recovery) (reported in 18 Class Action Reports 338 (May-June 1995)); In re Shell Oil Refinery, 155 F.R.D. 552 (E.D. La. 1993) ($ 170 million settlement fund; 17.92% fee award).
3. The Quality of Counsels' Performance
As discussed more thoroughly in the Fairness Opinion, the results achieved by plaintiffs' counsel in this case in the face of significant legal, factual and logistical obstacles and formidable opposing counsel, are nothing short of remarkable.
While the Fairness Opinion details the facts underlying the quality of representation and the obstacles of prosecution, see, e.g., Fairness Opinion, Findings of Fact § III, several points bear mention here:
First, the Settlement Agreement contains many innovative features highly beneficial to members of this class, namely: (1) the availability of full compensatory, as well as extra-compensatory, relief; (2) the minimum guarantee of $ 410 million and the absence of any cap on the total amount Prudential must pay to remediate claims; and (3) an aggressive "outreach" program designed to inform class members of their rights under the Settlement Agreement so as to achieve the maximum participation rate possible. See id. § IV (describing terms of settlement). Of even greater significance are the procedural checks and incentives aimed at ensuring that class members' claims under the ADR program are scored fairly. While Prudential employees score class members' claims at the first and third tiers of the four-tiered review process, the reviewers at the second and fourth tiers are completely unaffiliated with Prudential and are selected by class counsel and the regulators. See id. §§ IV.A and IV.E.1. Through the review process, class members are assured a fair evaluation of their claims. Moreover, because Prudential is responsible for the costs associated with the administration of the ADR program, there exists a financial disincentive for Prudential's reviewers to award unfairly low scores at the first and third tiers.
Second, the extraordinary quality of the settlement achieved by class counsel is also confirmed not only by the approval of its terms by the insurance regulators of every state and the District of Columbia, but by its clear and substantial improvements over the Task Force plan which 44 of those regulators carefully crafted and considered adequate. See id. §§ III.B, III.I and IV.E.
Third, as concluded in the Fairness Opinion, the Settlement Agreement is fair, reasonable and adequate. While certain class members have objected to various aspects of the Settlement Agreement,
these objectors fail to consider that the settlement is just that -- a settlement. In reaching a settlement, compromises must be made that render, possibly not the ideal result, but at the very least a fair one. By settling the case, plaintiffs' counsel efficiently avoided several potential risks of non-recovery including outright dismissal on technical legal grounds, such as statute of limitations, parol evidence, etc.
Finally, the standing and professional skill of plaintiffs' counsel, in particular Co-Lead Counsel, is high and undoubtedly furthered their ability to negotiate a valuable settlement and argue its merits before this Court. Several members of plaintiffs' counsel are leading attorneys in the area of class action litigation. Similarly, defendant's counsel's standing and skill are very high.
All of these factors reflect the quality of plaintiffs' counsel's service to the class and support the fee requested.
4. The Fee Percentage that Would Have Been Negotiated Were this Case the Subject of a Private Contingent Fee Agreement
The Fee Examiner concluded that:
given the extraordinary burdens and challenges of prosecuting this action on behalf of plaintiffs, the concomitant risks assumed by class counsel in undertaking this representation on a purely contingent basis, and the stellar reputations and expertise of class counsel, were this case the subject of a private contingent fee agreement at the time of engagement, class counsel might well have demanded and received a contingent fee agreement whereby they would receive upward of 20%, and even as high as 40%, of any future recovery in exchange for shouldering the enormous expenses and risks they faced at the outset of this case. . . . Of course, one is tempted to take the result and reason backward as to what contingent fee would have been negotiated. But that is not how contingent fees are arrived at in reality. At the time such fees are agreed upon, not only the sum of the recovery, but whether or not there will be any recovery, is unknowable.