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IN RE PRUD. INS. CO. OF AMER. SALES PRACTICES LIT.

July 22, 2003

IN RE: THE PRUDENTIAL INSURANCE COMPANY OF AMERICA SALES PRACTICES LITIGATION THIS DOCUMENT RELATES TO: ALL ACTIONS


The opinion of the court was delivered by: Alfred Wolin, Senior District Judge.

MEMORANDUM OPINION

This matter is before the Court on a joint application by counsel for plaintiffs Krell and Johnson for an award of fees and expenses in the class action lawsuit against the Prudential Insurance Company of America ("Prudential"). Krell is represented by Malakoff, Doyle & Finberg, P.C., Murray and Murray Co., L.P.A., Wilson, Frame, Benninger & Metheney, P.L.L.C., Berger & Lagnese, LLC, and Leesfield, Leighton, Rubio, Mahfood, & Boyers, P.A. Johnson is represented by the Law Offices of Richard H. Rosenthal, P.C. and the Selden Law Firm.

All interested parties have had the opportunity to submit written arguments with respect to this fee petition. Additionally, all of the parties have provided the supplemental information requested by this Court in its order dated June 12, 2002. The Court will decide the matter on the papers pursuant to Federal Rule of Civil Procedure 78. For the reasons stated herein, the application for fees and expenses will be granted in part and denied in part.

PROCEDURAL AND FACTUAL BACKGROUND

The Court will not review the lengthy history of this litigation. Instead, the Court refers its readers to the facts and procedural history of this case as set forth in its prior opinions and the opinion of the Third Circuit. See In re Prudential Ins. Co. of Am. Sales Practices Litig., 962 F. Supp. 450 (D.N.J. 1997) (approving class action settlement); In re Prudential Ins. Co. of Am. Sales Practices Litig., 962 F. Supp. 572 (D.N.J. 1997), aff'd in part, vacated in part, 148 F.3d 283 (3d Cir. 1998) (awarding attorneys' fees to lead class counsel); In re Prudential Ins. Co. of Am. Sales Practice Litig., 106 F. Supp.2d 721 (D.N.J. 2000) (awarding attorneys' fees to lead class counsel). Further discussion of the proceedings in this matter, specifically, the conduct of Michael P. Malakoff ("Malakoff"), one of the attorneys representing Krell, can be found in two opinions addressing a motion for sanctions brought against Malakoff. See In re Prudential Ins. Co. of Am. Sales Practices Litig., 63 F. Supp.2d 516 (D.N.J. 1999) (Walls, J.), aff'd in part, rev'd in part, In re Prudential Ins. Co. of Am. Sales Practice Litig. Agent Actions, 278 F.3d 175 (3d Cir. 2002).

In the instant motion, counsel for Krell and Johnson jointly request attorneys' fees, costs and expenses totaling $2.25 million.*fn1 On March 8, 1999, the lead counsel for the plaintiffs entered into a stipulation with counsel for Krell and Johnson (collectively referred to as the "Objectors"), agreeing that the Objectors would not oppose lead counsel's application for a $90 million fee award, and in return, lead counsel would not oppose the Objectors' application for a fee award of up to $2.25 million plus interest earned thereon from the earlier of the Finality Date, as defined in the stipulation or July 1, 1999.*fn2

The parties agreed, or in some cases the Objectors asserted and lead counsel did not dispute, that there were several ways the Objectors added value to the settlement. First, the parties agreed that the Objectors' objections to the notice materials and claim form were a material factor in the decision to amend such forms. The parties agreed that because of the amended forms, "at least 2-1/2% additional ADR claims (at least 12,500) were remediated at a score of "2" or higher that otherwise would not have been remedied. Co-Lead Counsel reasonably believes that the value of remediation of 12,500 ADR claims would exceed $50 million."

Second, the Objectors asserted and lead counsel did not dispute that by appealing this Court's settlement and fee award to the Third Circuit, the Objectors delayed the payment of approximately $41 million in fees and expenses for about two years, resulting in about $4.8 million in time value to Prudential.

Third, the Objectors asserted and lead counsel did not dispute that because the appeal to the Third Circuit delayed CoLead Counsel's final fee and expense application, the application was not made until the number of remediated ADR claims was better known, which provided an unspecified value to the Class. The Objectors claim that, by their conservative estimate, they contributed approximately $56 million in value to the settlement.

DISCUSSION

The Objectors' verified petition for attorneys' fees contains a plethora of justifications for the requested fee award. Interestingly, the Objectors fail to cite one case in support of the proposition that as objectors, they are entitled to attorneys' fees. The Court reminds the Objectors that they played a different role in this litigation from that of Class Counsel. The Court, therefore, will not treat their petition for fees as if they were class counsel, and the Objectors will not be awarded fees for all of their work conducted in the course of this matter. Instead, the Court will follow precedent and award fees which reflect the value the Objectors conferred upon the class.

While "[a]n objector to a class action settlement is not generally entitled to an award of counsel fees," In re Domestic Air Transp. Antitrust Litig., 148 F.R.D. 297, 358 (N.D.Ga. 1993), objectors are entitled to compensation for attorneys' fees and expenses if the settlement was improved as a result of their efforts. See In re Westinghouse Sec. Litig., 219 F. Supp.2d 657, 660 (W.D.Pa. 2002) (quoting White v. Auerbach, 500 F.2d 822, 828 (2d Cir. 1974)). If objectors are successful in challenging an award of attorneys' fees to lead class counsel, their objections have conferred a benefit on the class. See id. (citations omitted); see also Vizcaino v. Microsoft Corp., 290 F.3d 1043, 1051-52 (9th Cir.), cert. denied, 537 U.S. 1018, 123 S.Ct. 536, 154 L.Ed.2d 425 (2002); In re BankAm. Corp. Sec. Litig., 228 F. Supp.2d 1061, 1069-70 (E.D.Mo. 2002); In re Horizon/CMS Healthcare Corp. Sec. Litig., 3 F. Supp.2d 1208, 1215 (D.N.M. 1998).

As an initial matter, the Court will address the fee applications made by attorneys John T. Murray (from the firm of Murray & Murray Co., L.P.A.), and J. Michael Benninger (from the law firm of Wilson, Frame, Benninger, & Metheney, P.L.L.C.). While the Court does not doubt that these attorneys played an instrumental role in voicing the objections of their clients, the record before this Court demonstrates that they did not substantially participate in the objections made to the settlement or to the Court's award of fees to Class Counsel.

The Court now turns to the fee petition submitted by the remaining movants herein. When addressing a request for fees in a class action, a district court is typically required to thoroughly analyze the application, even where the parties have agreed to the award, because of the "`danger . . . that the lawyers might urge a class settlement at a low figure or on a less-thanoptimal basis in exchange for red-carpet treatment for fees.'" In re Gen. Motors Corp. Pick-Up Truck Fuel Tank Prods. Liab. Litig., 55 F.3d 768, 820 n. 39 (3d Cir. 1995) (citation omitted). This danger arises because generally, "`a defendant is interested only in disposing of the total claim asserted against it; . . . the allocation between the class payment and attorneys' fees is of little or no interest to the defense.'" Id. at 819-20 (quoting Prandini v. Nat'l Tea Co., 557 F.2d 1015, 1020 (3d Cir. 1977)). Thus, the amount of attorneys' fees and expenses to be awarded is within the court's sound discretion. See id. at 820.

Here, however, the Court is not faced with those typical concerns. The agreement under consideration was not made between Class Counsel and the defendant, but instead, between the Class Counsel and the Objectors. The fees to be paid to the Objectors have already been designated as part of the fees paid to Class Counsel, and the money has been set aside in escrow. The fee award does not involve the defendant, and it does not in any way compromise the value of the class settlement. Nevertheless, the Court has undertaken a thorough analysis of the fee application before it.

There are two methods used by courts for determining whether an attorney's request for fees is reasonable — the lodestar approach and the percentage-ofrecovery approach. See In re Cendant Corp. PRIDES Litig., 243 F.3d 722, 732 (3d Cir.), cert. denied, 534 U.S. 889, 122 S.Ct. 202, 151 L.Ed.2d 143 (2001). The lodestar method is commonly used in statutory fee-shifting cases, while the percentage-of-recovery method is favored in cases involving a common fund. See id. The percentage-of-recovery method "is designed to allow courts to award fees from the fund `in a manner that rewards counsel for success and penalizes it for failure.'" Id. (citing In re Prudential, 148 F.3d at 333).

The Court chooses to use the percentage-of-recovery method to analyze the fee application here. The Objectors seek fees based on their success in adding value to the class settlement, and the percentageof-recovery method is designed to reward attorneys for such successes. Moreover, the fee award to the Objectors is intended to reflect only the value they added to the settlement. By this award, the Court does not mean to reimburse the Objectors for all of their litigation costs. While the attorneys have submitted detailed billing records to this Court, along with explanatory affidavits, the Court believes that based on those records, it cannot make an accurate determination of the precise fees incurred objecting to the settlement and fee award. The Court believes that the percentage-of-recovery method will yield a more accurate and equitable fee award.

To determine the appropriate percentage, the Court weighs the following factors identified by the Third Circuit as a guide in making a reasonable fee determination:

(1) the size of the fund created and the number of persons benefitted; (2) the presence or 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 plaintiff's counsel; and (7) the awards in similar cases.

In re Cendant Corp. PRIDES Litig., 243 F.3d at 733 (quoting Gunter v. Ridgewood Energy Corp., 223 F.3d 190, 195 n. 1 (3d Cir. 2000)). The Court will ...


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