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April 22, 1998


The opinion of the court was delivered by: LECHNER


 LECHNER, District Judge

 On 27 February 1998, counsel for the plaintiff class (the "Plaintiff Class") filed a "Petition of Plaintiffs for Approval of Settlement and the Plan of Distribution and Plaintiffs' Memorandum in Support of that Joint Petition" (the "Joint Settlement Petition") and "Joint Petition of Plaintiffs' Counsel For an Award of Attorneys' Fees and Reimbursement of Expenses and Plaintiffs' Memorandum of Law in Support of that Joint Petition" (the "Joint Petition for Attorneys' Fees") (collectively, the "Joint Motions"). *fn1" During a hearing on 6 March 1998 (the "6 March 1998 Hearing"), the Joint Motions were granted and an order (the "6 March 1998 Order") was filed. This opinion is intended to supplement the explanation at the 6 March 1998 Hearing for the grant of the 6 March 1998 Order.


 A. Generally

 The request for attorneys' fees and costs derived from a $ 15,000,000.00 settlement (the "Settlement") of a securities class action stemming from the initial public offering (the "IPO") of Computron Software, Inc. ("Computron"). A number of cases arising from the IPO were commenced in April and May 1996 and were consolidated by order, dated 24 June 1996. See Joint Aff. at PP 19-20. The consolidated amended class action complaint (the "Complaint") alleged the defendants Computron, Andreas Typaldos ("A. Typaldos"), Elias Typaldos ("E. Typaldos"), David E. Gerth ("Gerth"), Gennaro Vendome ("Vendome"), Frederick Zenna ("Zenna"), Gregory Kopchinsky ("Kopchinsky") and Robert J. Migliorino ("Migliorino") *fn2" had falsely portrayed the financial condition of Computron. *fn3" The Complaint alleged these false portrayals were made in order to complete the IPO and allow certain of the Individual Defendants to profit by selling millions of dollars of Computron stock. See id. at PP 10-15.

 The IPO was completed on 24 August 1995 at $ 17.50 per share based primarily upon the 1994 financial statements of Computron (the "1994 Financials"). See Joint Aff. at PP 11-12. The 1994 Financials reported the first net profit in the history of Computron. See id. PP 12-13.

 On 21 February 1996, Computron unexpectedly announced its fourth quarter and year end 1995 results were being delayed indefinitely (the "21 February 1996 Announcement"). See Joint Aff. at P 15. On 1 April 1996, Computron announced it had incurred a substantial loss for the fourth quarter and year ended 31 December 1995 (the "1 April 1996 Announcement"). See id. at P 16. Discovery was stayed pending resolution of a motion to dismiss submitted by the Defendants in October. 1996. See Joint Aff. at PP 20, 22. On 27 January 1997, while the motion to dismiss was sub judice, Computron announced Arthur Andersen was withdrawing its reports on the previously issued financial statements for Computron (the "27 January 1997 Announcement"). See id. at P 17.

 On 17 April, 1997, Computron restated its financial statement for the years ended 31 December 1992, 1993, 1994 and 1995, and all interim periods subsequent to the IPO. See Joint Aff. at P 18. As a result, the motion to dismiss was deemed withdrawn and the Plaintiff Class amended its complaint to add the newly discovered information. See id. at PP 24-25. Thereafter, on 30 May 1997, the Plaintiff Class filed the fourth consolidated amended complaint, which the Defendants answered.

 The Defendants agreed to stipulate to a class and, on 27 June 1997, it was determined the instant action could proceed as a class action on behalf of a class consisting of all persons and entities who purchased Computron stock between 24 August 1995 and 27 January 1997. The Plaintiff Class excluded the Defendants, the officers and directors of Computron, members of their immediate families and their legal representatives, heirs, successors or assigns, any entity in which any Defendant has or had a controlling interest and the Underwriters. See Joint Aff. at PP 27-28.

 Since April 1996, counsel for the Plaintiff Class have diligently investigated and vigorously pursued claims asserted on behalf of the Plaintiff Class.


 A. Joint Settlement Petition

 1. Settlement Negotiations

 In July 1997, the Defendants approached the Plaintiff Class about the possibility of settling the instant action. See Settlement Brief at 5. Thereafter, during a three-month period, Co-Lead Counsel *fn4" for the Plaintiff Class engaged in four, arm's-length settlement meetings with counsel for the Defendants. See Joint Aff. at PP 37-38, 52. These meetings involved in-depth discussions concerning key liability and damage issues underlying the claims of the Plaintiff Class and the defenses asserted with respect to those claims. See id. at P 39.

 Specifically, counsel debated (1) whether the Plaintiff Class could assert claims under Section 11 of the Securities Act of 1933, 15 U.S.C. § 77k ("Section 11") on behalf of persons who purchased stock after the IPO, (2) whether the Plaintiff Class would be able to prove loss causation with respect to approximately ninety-five percent of its damages, and (3) the maximum amount of damages the Plaintiff Class would be able to recover if it prevailed at trial. See Joint Aff. at PP 15, 18. Arthur Andersen participated in certain of these negotiation sessions in an effort to resolve the claims the Plaintiff Class intended to assert. See Settlement Brief at 5.

 Counsel continued their efforts to achieve a satisfactory resolution of the instant action with the assistance of Magistrate Judge Dennis M. Cavanaugh. After two full-day mediation sessions before Magistrate Judge Cavanaugh on 20 October 1997 and 24 October 1997, the Plaintiff Class agreed to settle its claims against Defendants and Arthur Andersen for total consideration of $ 15,000,000.00. See Joint Aff. at P 52.

 2. Terms of the Settlement

 The Settlement consists of (1) payment by Computron of $ 1,000,000.00 in cash, (2) payment by the Insurance Carriers of $ 1,850,000.00 in cash, (3) payment by certain of the Individual Defendants, namely A. Typaldos, E. Typaldos and Vendome of $ 3,650,000.00 in cash, (4) payment by Arthur Andersen of $ 3,500,000.00 in cash, and (5) an additional $ 5,000,000.00 to be contributed by Computron in either cash, or at the option of Computron, newly issued common stock of Computron (the "Settlement Stock") (collectively the "Settlement Fund"). See Settlement Brief at 6.

 If Computron chooses to issue Settlement Stock instead of cash, the Plaintiff Class members will be protected against any decline in the value of the Settlement Stock. See Settlement Brief at 6. Each share of Settlement Stock distributed will be paired with a non-transferable right to resell the Settlement Stock at the value at which it was received to a trust Computron will fund with $ 5,000,000.00 in cash. *fn5" See id. Plaintiff Class members do not have to sell the Settlement Stock to the trust. See id. Members of the Plaintiff Class will have the opportunity to sell their shares into the market place as soon as they are received, or they may retain the shares in order to participate in any price appreciation that may occur in Settlement stock over time. See Joint Aff. at PP 6-7.

 At the 6 March 1998 Hearing, counsel for the Plaintiff Class indicated Computron had elected to contribute $ 5,000,000.00 in Settlement Stock at $ 5.00 a share. See Transcript form 6 March 1998 Hearing at 14.

 The plan of distribution (the "Plan of Distribution") of the proceeds from the Settlement Fund provides that each member of the Plaintiff Class will receive a pro rata share of his or her "defined loss." See Settlement Brief at 6. The defined loss is based upon the inflation per share in the price of Computron common stock during three distinct time periods. See id. The first period (the "First Period") is from 24 August 1995 through 20 February 1996. *fn6" See id. at 6-7. The second period (the "Second Period") is from 21 February 1996 through 1 April 1996. *fn7" See id. at 7. The third period (the "Third Period") is from 2 April 1996 through 27 January 1997. *fn8" See id.

 3. The Law

 Settlements of disputed claims, especially of complex class action litigations, are favored by the courts. See In re General Motors Corp. Pick-Up Truck Fuel Tank Prods. Liab. Litig., 55 F.3d 768, 784 (3d Cir.) ("GM Trucks ") ("The law favors settlement, particularly in class actions and other complex cases where substantial judicial resources can be conserved by avoiding formal litigation."), cert. denied, 516 U.S. 824, 133 L. Ed. 2d 45, 116 S. Ct. 88 (1995); Bell Atl. Corp. v. Bolger, 2 F.3d 1304, 1314 n.16 (3d Cir. 1993) ("Where a settlement is reached on terms agreeable to all parties, it is to be encouraged.").

 In reviewing a proposed settlement, a district court should determine whether a settlement is "fair, reasonable and adequate." GM Trucks, 55 F.3d at 785 (citations omitted). ...

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