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In re Cendant Corp. Litigation

February 5, 2003


The opinion of the court was delivered by: Walls, District Judge


This matter comes before the Court on petition of Lead Counsel for an award of attorney's fees. The Court heard oral argument on the petition on December 30, 2002, and for the following reasons approves an award of attorneys fees of $55 million plus interest.

Factual and Procedural Background

The history of this case is well-known to the parties and has been described at length in several documents, including this Court's opinion of August 15, 2000 (the "August 2000 Opinion"). See In re Cendant, 109 F. Supp. 2d 235 (D.N.J. 2000), aff'd in part, rev'd in part 264 F.3d 201 (3d Cir. 2001). In the August 2000 Opinion and accompanying order, the Court approved the settlement of the underlying dispute between Cendant and its shareholders and awarded Lead Counsel a fee of approximately $262 million based on the fee grid approved by the Court at the outset of the litigation. In doing so, the Court determined that the fee grid, selected through an auction process, would substitute for the fee provisions included in the Retainer Agreement negotiated between Lead Plaintiffs and Lead Counsel dated June 10, 1998 (the "Retainer Agreement"). The Retainer Agreement included a fee provision providing for up to $187 million in fees.

On appeal, the Third Circuit affirmed the Court's approval of the settlement, but vacated the fee award and remanded the question of attorneys fees with instructions that the Court "decline to consider any further fee requests that are not submitted with the prior approval of the funds." 264 F.3d at 286.

Lead Plaintiffs and Lead Counsel now petition this Court to approve a fee of $55 million plus interest for services rendered in this case. The Court received objections to the request from the firms of Sirota & Sirota on behalf of shareholder the Joanne A. Aboff Family Trust ("Sirota"), Kendrick & Nutley on behalf of shareholder Tere Throenle ("Nutley"), and the Law Offices of Lawrence W. Schonbrun on behalf of shareholder Faye Schonbrun ("Schonbrun"). Schonbrun did not appear at the December 30, 2002 hearing on the petition; thus, the Court will consider the objections as outlined in his papers.


A. Standard

In remanding the question of attorney's fees to this Court, the Third Circuit iterated the "standards that should guide the District Court's discretion in considering fee requests under the [Private Securities Litigation Reform Act ("PSLRA" or "Reform Act")] that will be the principal focus on remand so as to help bring this now protracted matter to a close." In re Cendant, 264 F.3d at 281. The Third Circuit made clear that the scope of this Court's obligation to ensure the reasonableness of a fee request is different under the Reform Act from other cases because, due to the Reform Act's provisions for the selection of lead plaintiff and lead counsel, "courts have far more reason at the outset to think that counsel selection and retention were done in the best interest of the class in a typical Reform Act case than they do in other class action contexts." Id. at 282. Given the requirements of the PSLRA, a properly-selected lead plaintiff is "in the best position... to determine (at least initially) what is lead counsel's fee should be." Id.

Therefore, the Third Circuit held, under the PSLRA, courts should accord a presumption of reasonableness to any fee request submitted pursuant to a retainer agreement that was entered into between a properly-selected lead plaintiff and a properly-selected lead counsel. Id. In this case, Lead Plaintiff and Lead Counsel (whose selection the Third Circuit approved) entered into the Retainer Agreement, which provided for attorney's fees of up to $187 million. After engaging in negotiations over a proper fee request, however, Lead Plaintiffs and Lead Counsel now seek $55 million in fees - approximately 30 % of the amount provided for in the Retainer Agreement. Because this lower amount was the product of negotiations between Lead Plaintiff and Lead Counsel, the principles articulated by the Third Circuit in justifying the presumption of reasonableness for fee awards in retainer agreements apply to the current request. Therefore, the fee request of $55 million is subject to a presumption of reasonableness.

As made clear by the Third Circuit, the presumption of reasonableness may be rebutted upon a prima facie showing by an objector that the fee is "clearly excessive." In re Cendant, 264 F.3d at 283. In making this clear excessiveness inquiry, district courts should be primarily guided by the factors set forth in Gunter v. Ridgewood Energy Corp., 223 F.3d 190, 195 n.1 (3d. Cir. 2000):

1. The size of the fund created and the number of persons benefitted.

2. The presence of absence of substantial objections by members of the class to the settlement terms and/or fees requested by counsel.

3. The skill and efficiency of the attorneys involved.

4. The complexity and duration of the litigation.

5. The risk of nonpayment.

6. The amount of time devoted to the case by ...

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