The opinion of the court was delivered by: JOEL PISANO, District Judge
One of the largest settlements in securities class action
litigation history and particularly in post-Private Securities
Litigation Reform Act ("PSLRA") times, the approximately $610
million*fn2 Gross Global Settlement ("Global Settlement") of
what were originally fifty-three separate lawsuits against
one-time telecommunications giant Lucent Technologies, Inc.
("Lucent"), and various current and former Lucent directors,
officers, and employees is the backdrop for this Opinion. See
Stanford L. Sch. Sec. Class Action Clearinghouse, at http://
www.securities.stanford.edu/ (listing the Lucent Global
Settlement as second among the five largest
settlements).*fn3 In earlier opinions, the Court approved
the settlements allocated from the Gross Global Settlement to
each group of Plaintiffs in In re Lucent Technologies, Inc.
Securities Litigation., 00-cv-621 (JAP), Reinhart v. Lucent
Technologies, Inc., 01-cv-3491 (JAP), Laufer v. Lucent
Technologies, 01-cv-5229 (JAP) , Pallas v. Schacht, 02-cv-2460
(JAP), Cooper v. Schacht, 02-cv-4260 (JAP), and Balaban v.
Schacht, 02-cv-4852 (JAP). See In re Lucent Tech., Inc., Sec.
Litig., 307 F. Supp.2d 633 (D.N.J. 2004); Pallas v. Schacht,
No. 02-cv-2460 (D.N.J. May 4, 2004);*fn4 Balaban v.
Schacht, No. 02-cv-4852 (D.N.J. April 23, 2004); Laufer v.
Lucent Tech., No. 01-cv-5229 (D.N.J. March 24, 2004); Reinhart
v. Lucent Tech., Inc., No. 01-cv-3491 (D.N.J. March 15,
2004).*fn5 Here, the Court resolves the parties's respective
applications seeking attorney's fees and reimbursement of
expenses in these cases. For the reasons set forth below, the
applications for fees and expenses are granted in part and
modified in part. The Court's conclusions are final, and a final
Order accompanies this Opinion.
The Court articulates the relevant standards and guidelines in
making these fee and expense determinations before examining the
Plaintiff's application in each case.
A. Discretion and the Percentage-of-Recovery Preference
The district court employs its discretion to fix the amount of
attorney's fees and expenses. In re Gen. Motors Corp. Pick-Up
Truck Prods. Liab. Litig. ("Gen. Motors"), 55 F.3d 768, 783,
821 (3d Cir. 1995) (citing Lindy Bros. Builders, Inc. v. Am.
Radiator & Std. Sanitary Corp., 540 F.2d 102, 115 (3d Cir.
1976)). Determining an appropriate award, however, is not an
exact science. In re Computron Software, Inc. ("Computron"),
6 F. Supp.2d 313, 321 (D.N.J. 1998). Rather, the facts of each
case inform the amount of any award. Id.
A district court must thoroughly analyze a fee application in a
class action settlement. See Gen. Motors, 55 F.3d at 819. Its
scrutiny remains probing even where the parties have consented to
a fee award. Id. at 820 (explaining that consent is not
determinative because of a "`danger . . . that the lawyers might
urge a class settlement at a low figure or on a less-than-optimal
basis in exchange for red-carpet treatment for fees.'") (quoting
Weinberger v. Great N. Nekoosa Corp., 925 F.2d 518, 524
(1st Cir. 1991)); see id. at 819-20 (noting that a
defendant's interests do not eliminate this risk because "`a
defendant is interested only in disposing of the total claim
asserted against it; . . . the allocation between the class
payment and the attorney's fees is of little or no interest to
the defense.'") (quotation omitted). Therefore, a district court
must be mindful to guard against "any actual abuse or appearance
of abuse capable of creating a public misunderstanding." Gen.
Motors, 55 F.3d at 920.
The two approaches for determining the reasonableness of an
attorney's fees request are the lodestar method and the
percentage-of-recovery method. Each is appropriate in a
particular type of case. Id. at 821 (citation omitted). A
court, first, must categorize the type of action before it and
then apply the corresponding method for awarding fees. Id.
Though only one of the methods should serve as the primary basis
for establishing the fee award, a "court may . . ., as a check,
want to use the lodestar method to assure that the precise
percentage awarded does not create an unreasonable hourly fee."
Id. at 822.
The lodestar method, which multiplies the number of hours by an
hourly rate appropriate for the region and the lawyer's
experience, is proper in statutory fee-shifting cases. See Gen.
Motors, 55 F.3d 821. Conversely, the percentage-of-recovery
method is used in common fund cases, on the theory that class
members would be unjustly enriched if they did not adequately
compensate counsel responsible for establishing the fund. See
id. (citation omitted). The Third Circuit and this Court have
repeatedly approved and applied the percentage-of-recovery method
in common fund securities fraud cases. See, e.g., In re Cendant
Corp. Litig. ("Cendant"), 264 F.3d 201, 220 (3d Cir. 2001)
("For the past decade, counsel fees in securities litigation have
generally been fixed on a percentage basis rather than by the
so-called lodestar method."); In re AremisSoft Corp. Sec.
Litig. ("AremisSoft"), 210 F.R.D. 109, 128 (D.N.J. 2002)
(observing that "the percentage-of-recovery method is used in
common fund cases on the theory that class members would be
unjustly enriched if they did not adequately compensate counsel
responsible for generating the fund."); see also
15 U.S.C. § 78u-4(a)(6) (providing that a fee award should constitute "a
reasonable percentage of the amount of any damages and
prejudgment interest actually paid to the class.") Certainly
while the Third Circuit has been partial to this method in common
fund cases, see id. at 821-22, neither the Circuit nor the
United States Supreme Court requires courts to exclusively use
the percentage-of-recovery method. See id. at 821 (allowing a
court the discretion to select the method) (quoting Weinberger
v. Great N. Nekoosa Corp., 925 F.2d 518, 524 (1st Cir.
Respecting the Circuit's preference, this Court relies on the
percentage-of-recovery method in all of the cases before
it.*fn6 See In re Ikon Office Solutions, Inc. Sec. Litig.
("Ikon"), 194 F.R.D. 166, 194 (E.D. Pa. 2000) (applying the
percentage method in a "paradigmatic common fund case") (citing
In re Chambers Dev. Sec. Litig., 912 F. Supp. 852, 860 (W.D.
Pa. 1995)); see also Boeing Co. v. Van Gemert, 444 U.S. 472,
478 (1980) (recognizing that an attorney who maintains a suit
that results in a fund or benefit in which others have a common
interest may obtain fees from that common fund); AremisSoft,
210 F.R.D. at 128 ("Attorneys who represent a class and aid in
the creation of a settlement fund are entitled to compensation
for legal services offered to the settlement fund under the
common fund doctrine.") (citation omitted). The fact that case
law makes dubious the application of the lodestar method in a
class action also supports the Court's election of the
percentage-of-recovery method.*fn7 See Ikon, 194 F.R.D. at
194 (noting that the lodestar method has "come under attack"
because it may encourage attorneys to delay settlement to
maximize fees and strains the judicial system by compelling
courts to review the propriety of thousands of billable hours)
(citing In re Prudential Ins. Co. of Am. Sales Practices
("Prudential II"), 148 F.3d 283, 333 (3d Cir. 1998)).
Applying the percentage-of-recovery approach, a court, first,
must value the proposed settlement and, second, decide what
percentage of the settlement should be awarded as fees. Gen.
Motors, 55 F.3d at 822. In valuing a settlement offer, a
district court must "determine a precise valuation of the
settlement on which to base its award." Id. Though this is a
rigorous task, "[a]t the very least, the district court . . .
needs to make some reasonable assessment of the settlement's
value." Id.; see also Weiss v. Mercedes-Benz of N. Am.,
899 F. Supp. 1297, 1304 (D.N.J. 1995) ("[W]hen parties negotiate a
settlement they have far greater control of their destiny than
when a matter is submitted to a jury. Moreover, the time and
expense that precedes the taking of such a risk can be
staggering. This is especially true in complex commercial
litigation."), aff'd, 66 F.3d 314 (3d Cir. 1995). A court also
must specify the percentage used in calculating the fee award.
Gen. Motors, 55 F.3d at 822, though there is no set standard
for determining a reasonable percentage. As a general matter,
awards calculated under the percentage-of-recovery method can
widely range from nineteen percent to forty-five percent of a
settlement fund. Computron, 6 F. Supp.2d at 322.
B. Gunter v. Ridgewood Energy Corp., 223 F.3d 190, 195 n.
1 (3d Cir. 2000) The Gunter Factor Analysis
Particularly in a common fund case, a district court should
consider several factors in awarding fees to determine if a
requested fee is appropriate. See Gunter, 223 F.3d at 195 n.
1; see also In re Safety Components, Inc., Sec. Litig.
("Safety Components"), 166 F. Supp.2d 72, 93-94 (D.N.J.
2001). These factors include:
(1) the size of the fund and the number of persons
(2) the presence or absence of substantial objections
by class members to the fee amount; (3) the skill and
efficiency of counsel;
(4) the complexity and duration of the action; (5)
the risk of nonpayment;
(6) the amount of time that counsel spent on the
(7) awards in similar cases.
Gunter, 223 F.3d at 195 n. 1 (citations omitted). These factors
"need not be applied in a formulaic way" because "in certain
cases, one factor may outweigh the rest." Gunter, 223 F.3d at
195 n. 1.
C. The Fee and Expense Applications at Issue
1. In re Lucent Tech., Inc. Secs. Litig., 00-cv-621 (JAP)
On Behalf of The Common Shareholders
The firms Bernstein Litowitz Berger & Grossmann LLP and Milberg
Weiss Bershad Hynes & Lerach LLP serve jointly as Lead Counsel
("Common Shareholders Lead Counsel") in this case. The Common
Shareholders Class will receive a combination of cash, stock, and
warrants valued at approximately $517 million, the sum allocated
to this Class from the Global Settlement Fund. Common
Shareholders Lead Counsel, on behalf of all Plaintiffs's Counsel,
request 17% of the $517 million, or $87.89 million at the current
value of the fund,*fn8 to be paid in cash and securities in
the same proportion as they comprise the Gross Fund.
Additionally, Common Shareholders Lead Counsel also seek $3.5
million to reimburse them for expenses incurred in handling this
consolidated class action.
Under PSLRA, a fees award negotiated between a
properly-appointed lead plaintiff and properly-appointed lead
counsel as part of a retainer agreement enjoys a presumption of
reasonableness. Cendant, 264 F.3d at 282 (citation omitted).
This presumption preserves the lead plaintiff's role as "the
class's primary agent vis-a-vis its lawyers." Id. Absent
unusual and unforeseeable changes, courts should honor that
presumption. Id. at 283. Even where changed circumstances do
not exist, courts must determine whether the presumption is
rebutted by a "prima facie showing that the retained agreement
fee is clearly excessive." Id. In so evaluating, courts should
apply the factors set forth in Gunter, 223 F.3d at 195 n. 1.
Consistent with the PSLRA, the aim of this factor inquiry is "not
to assess whether the fee request is reasonable; instead, the
goal is to determine whether the presumption of reasonableness
has been rebutted." Cendant, 264 F.3d at 284.
Common Shareholders Lead Counsel's request is presumptively
reasonable. See Cendant, 264 F.3d at 282. The Two Lead
Plaintiffs, Teamsters Locals 175 & 505 D & P Pension Trust Fund
(the "Pension Trust Fund") and The Parnassus Fund and Parnassus
Income Trust/Equity Income Fund ("Parnassus"), were properly
appointed under the terms of the PSLRA. Despite that Common
Shareholders Lead Counsel was initially appointed as a result of
sealed-bid auctions, a method that the Third Circuit now
prohibits, each Lead Plaintiff has approved the selection of Lead
Counsel. See Cendant, 264 F.3d at 273-74, 279-80 (holding that
the district court abused its discretion in conducting an auction
to appoint lead counsel, yet concluding that the error was
harmless because the selected law firms were the same as those
the Lead Plaintiff initially sought for appointment). The Lead
Plaintiffs have worked with Common Shareholders Lead Counsel
throughout this action. More specifically, Lead Plaintiffs have
reviewed the fee application, monitored their representation, and
been informed of litigation risks as well as benefits. Common
Shareholders Lead Counsel accepted this case on a contingent
basis. Though each of the Lead Plaintiffs initially signed
separate retainer agreements, they negotiated a revised fee
agreement with Common Shareholders Lead Counsel when the case
concluded to reflect the evolution of the case and in an effort
to harmonize the terms of the two original retainer agreements.
Lead Plaintiffs negotiated with Common Shareholders Lead Counsel
for considerable time to secure a fee of 17% for approval and
recommendation to the Court. In fact, the lawyer for Parnassus,
Steven J. Toll, Esq., of Cohen Milstein Hausfeld & Toll appeared
at the Fairness Hearing on December 12, 2003, to elaborate on the
negotiations that took place between the Lead Plaintiffs and Lead
Counsel. Mr. Toll represented that the Chairman of the Parnassus
Fund is "comfortable with" the 17% request. (Transcript of
Proceedings dated Dec. 12, 2003 at 88; see id. at 87-88.)
Accordingly, the Court shall presume reasonable this fee request,
absent a finding that the fee is prima facie clearly excessive
under the Gunter test.*fn9
(1) Gunter Factor Complexity and Duration of Litigation
In considering, first, the complexity and duration of the
litigation, see Gunter, 223 F.3d at 195 n. 1, 197 ("The
complexity and duration of the litigation is the first factor a
district court can and should consider in awarding fees."), the
Court finds that the complex nature of this long-enduring
litigation is without dispute. This action involved an alleged
massive fraud arising from a number of circumstances including:
(1) Lucent's inability to keep pace with the industry in
developing optical networking products capable of running at
"OC-192" speed (the then product of choice for Lucent's potential
customers); (2) widespread problems the Company was experiencing
with a broad range of its other optical networking products; (3)
the widespread problems throughout its product lines relating to
product design, reliability, and timeliness of deliveries; and
(4) problems with AT&T, Lucent's largest customer. Instead of
reducing its public projections or revenue and earnings to
reflect the Company's true financial condition, Defendants
allegedly misrepresented the demand for Lucent's products.
According to the Plaintiffs, the Company improperly booked
hundreds of millions of dollars of revenue as "sales." In short,
this was an exceptionally intricate case involving both
sophisticated issues of fact and law, many of which Defendants
Additionally, the settlement negotiations were inherently
complicated, and Common Shareholders Lead Counsel performed above
and beyond the call of duty in all facets of the negotiations
process. The negotiations continued between September 2002 and
March 2003, when the Defendants and Common Shareholders Lead
Counsel reached an agreement in principle. After Common
Shareholders Lead Counsel agreed to a settlement for its client,
the Class, they then negotiated with Counsel for Plaintiffs in
all of the other Lucent-related actions to establish the specific
terms of each settlement and to allocate the funds within the
Global Settlement. (See generally Agreement Re: Global
Settlement of Lucent Litigations Exs. 1-7.) The Court cannot
overstate that Common Shareholders Lead Counsel provided
immeasurable assistance to the Court throughout this stage of the
negotiations as well.
The duration of this litigation also favors the fees award.
Filed in January 2000, the case proceeded for nearly four years
before it was resolved. After, the Plaintiffs learned that the
scope and the nature of the alleged fraud was much broader than
initially contemplated. Following an extensive investigation,
Common Shareholders Lead Counsel filed five consolidated amended
complaints. Common Shareholders Lead Counsel estimates that a
trial would have required tens of thousands of additional hours
of work. To be sure, this is not hyperbole Lead Counsel has
already devoted more than 61,000 hours to this case for, among
other things, discovery investigations, the service of forty-two
subpoenas that produced approximately three million pages of
discovery, a considerable motion practice, and its deposition
preparations. It is likely, too, that additional, significant
work will be necessary to administer the settlement, yet another
time-consuming task that Common Shareholders Lead Counsel has
agreed without pause to perform. Overall, this factor supports
the fees request.
(2) Gunter Factor Presence or Absence of Substantial
The second Gunter factor is "the presence or absence of
substantial objections by members of the class to the settlement
terms and/or fees requested by counsel." Gunter, 223 F.3d at
195 n. 1. As evidenced by the minimal number of objections
received, the Class's reaction supports the presumption of
reasonableness. Consistent with the Court's Preliminary Approval
Order, Lead Counsel took steps to mail approximately 800,000
copies of the Notice to potential Class Members. By November 26,
2003, more than 2.98 million notices had been mailed to potential
Class Members. From this group, only about nine people have
objected to the fees application. One objector, Martha W. Hutson,
who appeared at the Fairness Hearing on December 12, 2003 to
primarily challenge the notice of the Settlement objected
tangentially to the requested attorney's fees.*fn10 (See
Transcript of Proceedings dated December 12, 2003 at 31 ("[I]t
would be easier to justify the requested attorney's fee of more
than $87 million if the [S]ettlement [A]greement also provided
all [C]lass [M]embers with injunctive relief.")) While the Court
has considered these objections and does not in any way diminish
the concerns voiced within them, the Court concludes that the
lack of a significant number of objections is strong evidence
that the fees request is reasonable, see In re Cendant Corp.
Deriv. Action Litig., 232 F. Supp.2d 327, 338 (D.N.J. 2002)
(noting that an extremely small number of complaints regarding
the proposed fees favors approval of the requested fees). The
number is particularly telling because the Class includes
hundreds of large, sophisticated institutional investors who,
collectively, purchased a substantial percentage of Lucent common
stock during the Class Period. Thus, this factor also respects
(3) Gunter Factor Skill and Efficiency of Counsel
The third factor of the Gunter approach requires a court to
look at "the skill and efficiency of the attorneys involved."
Gunter, 223 F.3d at 195 n. 1; id. at 198 (stating that the
goal of the percentage fee-award approach is to ensure "that
competent counsel continue to undertake risky, complex, and novel
litigation.") Indeed, "the results obtained" for a class evidence
the skill and quality of counsel. Cullen v. Whitman Med. Corp.,
197 F.R.D. 136, 149 (E.D. Pa. 2000).
Again, the Court does not exaggerate in stating that Common
Shareholders Lead Counsel was at the helm of the entire Global
Settlement process. Their efforts resulted in an extraordinary
settlement with a unique structure that includes stock, cash, and
warrants. Using its creative vein, Common Shareholders Lead
Counsel negotiated for the warrants as part of the settlement to
prevent Lucent from benefitting from its compromised financial
condition, yet secure for the Class a significant upside
potential in the event that Lucent's condition improves.
Given Lucent's precarious financial status at all times
relevant to this litigation, the Company's ability to pay was an
actual and vital consideration for any settlement. Critical to
the negotiations as well, Lucent agreed to settle this matter
only if it could settle several, related actions then pending
against the Company. For the sole purpose of evaluating Lucent's
financial condition, the Court created an "Ability to Pay
Committee" comprised of several attorneys who participated in the
Global Settlement negotiations, namely, David J. Bershad, Esq.
(Case No. 00-621), Daniel L. Berger, Esq. (Case No. 00-621),
Olimpio Lee Squitieri, Esq. (Case No. 01-5229), and Todd Collins,
Esq. (Case No. 01-3491). This Committee retained experts to study
and produce opinions on Lucent's financial capabilities. While
all Committee Members, no doubt, well served the Court, Messrs.
Bershad and Berger, the two main attorneys for the Common
Shareholders, primarily and meaningfully influenced the
Committee's work, investigating closely with their experts to
learn the true limits and constraints on any possible settlement.
The result was Common Shareholders Lead Counsel's proposal that
maximized the recovery for the Class and permitted Lucent to
continue its operations and efforts towards regaining financial
progress. They successfully negotiated approximately 83% of the
Gross Global Settlement for the Settlement of this particular
action, No. 00-621. But their monumental task did not end there.
After the Common Shareholders Lead Counsel and Lucent agreed to
the Gross Global Settlement sum, Common Shareholders Lead
Counsel, once again, retrieved its laboring oar to negotiate with
counsel for all of the other Global Settlement participants and
ultimately allocated monies from that sum to those participants.
As Common Shareholders Lead Counsel point out in this
Application, their efforts are laudable as well because they
achieved results without the aid of a governmental investigation.
See In re Rite Aid Corp. Sec. Litig., 146 F. Supp.2d 706, 735
(E.D. Pa. 2001) ("Rite Aid I") (noting the skill and efficiency
of counsel and the successful results "in a litigation that was
far ahead of public agencies like the Securities and Exchange
Commission and the United States Department of Justice, which
long after the institution of this litigation awakened to the
concerns that plaintiffs's counsel first identified. . . .")
Though an SEC investigation concerning Lucent was ongoing, it
neither prompted this litigation nor assisted Common Shareholders
Lead Counsel in handling this matter.
The quality and vigor of opposing counsel is also relevant in
evaluating the quality of the services provided by Common
Shareholders Lead Counsel. See, e.g., Ikon, 194 F.R.D. at 194;
In re Warner Communications. Sec. Litig., 618 F. Supp. 735, 749
(S.D.N.Y. 1985) ("The quality of opposing counsel is also
important in evaluating the quality of plaintiffs' counsel's
work.") (citation omitted), aff'd, 798 F.2d 35 (2d Cir. 1986).
The law firms of Cravath Swaine & Moore ("Cravath") and Lindabury
McCormick & Estabrook superbly represented the Defendants. In
particular, the Cravath firm, which served as Lead Counsel for
the Defendants, is one of the premier law firms in the world,
with a well-rooted reputation for exceptional legal services.
That firm routinely represents some of the most sophisticated
clients in the world in defense of putative class action
securities litigations. Consummate professionals, the attorneys
from Cravath were meticulously prepared and exceptionally skilled
at all times before this Court. If necessary, they were poised to
try the case and present a formidable defense on both the
liability and damages claims. The fact that Common Shareholders
Lead Counsel for the Plaintiffs obtained a favorable settlement
from parties represented by awesome adversaries underscores the
quality of their representation.
Ultimately, too, the result itself evidences counsel's skill
and efficiency. See AremisSoft, 210 F.R.D. at 132 (noting "the
single clearest factor reflecting the quality of the class
counsel's services to the class are the results obtained.");
Safety Components., 16 F. Supp.2d at 97 (considering
"excellent result achieved" under skill and expertise factor of
analysis). This factor thus supports the fees request.
(4) Gunter Factor Size of Fund and Number of Persons
"[T]he size of the fund created and the number of persons
benefitted," Gunter, 223 F.3d at 195 n. 1, is also a
consideration. In general, as the settlement fund increases, the
percentage award decreases. In re Prudential Ins. Co. of Am.
Sales Practices ("Prudential II"), 148 F.3d 283, 339 (3d Cir.
1998); see also Cullen, 197 F.R.D. 136, 148 (E.D. Pa. 2000).
The "basis for this inverse relationship is the belief that `[i]n
many instances the increase [in recovery] is merely a factor of
the size of the class and has no direct relationship to the
efforts of counsel." Prudential II, 148 F.3d at 339 (citations
Common Shareholders Lead Counsel has ensured an enormous
benefit to many in negotiating for the Class such a substantial
recovery against Lucent. This is one of the largest post-PSLRA
securities settlements achieved, evidently second only to that in
Cendant. See Stanford Law Sch. Sec. Class Action Clearinghouse
Database at http://securities.stanford.edu/top_ten_list.html
(providing a top ten list of the largest class action settlement
suits). The Settlement is, indeed, extraordinary because Lucent
has vigorously denied liability throughout this action and at all
times was poised to offer viable defenses to the claims. And,
Lucent teetered on the brink of bankruptcy throughout this
litigation and during settlement negotiations. Common
Shareholders Lead Counsel ultimately secured a settlement that
compensates Class Members for their injuries yet enables Lucent
to continue its operations and work towards achieving stability
and prosperity once again. See AremisSoft, 210 F.R.D. at 132
("In other words, rather than permitting litigation to destroy a
business and shortchange investors, as securities class actions
so often do, Plaintiffs' Counsel created a settlement that
promotes a just result and furthers economic activity.")
Significantly, too, many will benefit from this settlement. The
Class Members are all persons or entities who purchased Lucent
common stock between October 26, 1999 and December 20, 2000 and
suffered damages as a result. More than 2.98 million notices and
proofs of claims have been mailed to potential Class Members. In
this case, the size of the Fund and of the Class evidences Common
Shareholders Lead Counsel's tremendous efforts in negotiating
This factor favors the presumption that the requested fee is
(5) Gunter Factor Risk of Nonpayment
The fifth factor under Gunter is "the risk of nonpayment."
Gunter, 223 F.3d at 195 n. 1. This risk is high when a
defendant is close to insolvency. Id. at 199. Likewise, the
risk of nonpayment is "acute" where a defendant lacks
"significant unencumbered hard assets against which plaintiffs
could levy had a judgment been obtained." Cullen, 197 F.R.D. at
A truly grave possibility of non-payment was the impetus for
the settlement negotiations here. Suffering a dramatic drop in
its stock price between December 2000 and October 2002, Lucent
confronted a severely compromised status at all times relevant to
this litigation. By October 2002, the stock price sunk to an
all-time low of $0.58 per share. News articles in late 2002
forecasted that Lucent would be compelled to file for bankruptcy
or reorganization. Thus, when the parties began to negotiate
seriously, the Plaintiffs, with potentially years of vigorous,
expensive litigation awaiting them, encountered a Company that
was slowly, yet steadily deteriorating.
When negotiations began, the Court appointed an "Ability to Pay
Committee" to assess Lucent's capability to satisfy a judgment.
In fact, as a result of that Committee's work, the Court learned
that Lucent could not fund a sizeable cash settlement and could
have filed bankruptcy at any moment during the litigation.
Moreover, Lucent agreed to settle only if it could achieve a
global resolution of Lucent-related lawsuits; indeed, this result
was ultimately reached here. If this case had not settled, the
Class would have continued to spend significant monies and thus
would have reduced considerably the net recovery for the Class.
Of all the Plaintiffs involved in the various Lucent-related
litigations pending before this Court, this particular Class
faced the greatest risks because of the magnitude of the claims,
the challenging proofs required, and the overall precarious
status of Lucent as an entity.
Furthermore, courts have recognized that the risk of
non-payment is heightened in a case of this nature where counsel
accepts a case on a contingent basis. See Gunter, 223 F.3d. at
199 (noting that "the risk that counsel takes in prosecuting a
client's case should also be considered when assessing a fee
award"). Here, the intrinsically speculative nature of this
contingent fee case enhances the risk of non-payment and bolsters
the Court's analysis under this factor.
(6) Gunter Factor Amount of Time that Counsel Devoted to
The sixth Gunter factor is "the amount of time devoted to the
case" by counsel. Gunter, 223 F.3d at 195 n. 1. Making
extraordinary efforts for the Class, Common Shareholders Lead
Counsel has devoted to this litigation over 61,000 hours and has
advanced more than $3.74 million in expenses since it was filed.
Common Shareholders Lead Counsel have engaged in comprehensive
investigations and discovery for pleading purposes and motion
practice. Their work has included hundreds of hours of intensive
propriety investigations. Plaintiffs have served extensive
document requests on Defendants and served forty-two third-party
subpoenas on, among others, analysts who covered Lucent during
the Class Period, Lucent's vendors, Lucent's auditor, Lucent's
distributors, customers, and certain former Lucent employees.
Common Shareholders Lead Counsel reviewed more than 2.5 million
pages of documents produced by Defendants and more than 500,000
pages produced by third parties. Forty-five attorneys
participated in this massive document review. Overall, an average
of ten attorneys worked on a full-time basis for ten consecutive
months between July 2001 and April 2002.
In addition to time spent reviewing all publicly available
information, Common Shareholders Lead Counsel engaged both
in-house and outside investigators, forensic accountants,
investment bankers, and economic experts on damages in securities
actions. As a result of their initial investigations, Lead
Counsel identified more than 200 witnesses with knowledge of
relevant facts and conducted interviews with former Lucent
employees, customers, and distributors. Common Shareholders Lead
Counsel has also used considerable time to prepare and oppose
discovery and dispositive motions. Based on their tireless
efforts, Plaintiffs ultimately filed five, consolidated amended
complaints, the last of which withstood the Court's scrutiny when
the Defendants challenged it with a well-briefed, persuasive
motion to dismiss. Finally, Common Shareholders Lead Counsel is
handling all of the administrative tasks related to the Global
Settlement. In so handling, they will assume, quite obviously, a
substantial amount of work in administering the settlement.
Without question, they have dedicated very significant time,
labor, resources, and expenses not just to their own client's
case, but also to the Global Settlement overall and all steps
taken towards resolving other Lucent-related litigations.
This factor overwhelmingly favors the Settlement.
(7) Gunter Factor Awards in Similar Cases
In evaluating Common Shareholders Lead Counsel's request for
17%, the Court must consider awards in similar cases. Gunter,
223 F.3d at 195 n. 1. Courts should not adhere to a formulaic
approach in determining the appropriate range for fee awards, but
must consider the relevant circumstances on a case-by-case basis.
In re Cendant PRIDES Litig., 243 F.3d 722
, 736 (3d Cir. 2001);
AremisSoft, 210 F.R.D. at 133 (citation omitted). While
percentages awarded have varied considerably, most awards range
"from nineteen percent to forty-five percent of the settlement
fund." In re Cendant PRIDES Litig., 243 F.3d at 736 (3d Cir.
2001); Smith v. First Union Mortgage Corp., No. 98-5360, 1999
WL 509967, at * 4 (E.D. Pa. July 19, 1999); In re Computron
Software ("Computron"), 6 F. Supp.2d 313, 322 (D.N.J. 1998);
cf. Ikon, 194 F.R.D. at 194 (concluding that while "[t]he
median in class actions is approximately twenty-five percent,
. . . awards of thirty percent are not uncommon in securities
class actions.") (citing Ratner v. Bennett, No. 92-4701, 1996
WL 243645, at *8 (E .D. Pa. May 8, 1996)). For example, more than
twenty relatively recent class action decisions in the Third
Circuit reflect fee awards between 33 1/3% and 22.5%:
Case Recovery % Awarded
1. In re Mobile Media Sec. $26.95 million 33.33%
Litig., Civ. No. 96-5723
(D.N.J. Feb. 24, 2000)
2. In re PNC BankCorp Sec. $5.45 million 33.33%
Litig., Civ. No. 94-1961
(W.D. Pa. Sept. 25, 1998)
3. In re PNC Sec. Litig., $6.3 million 33.33%
Civ. No. 90-0592 (W.D.
Pa. Dec. 6, 1993)
4. In re Greenwich Pharm. $4.375 million 33.33%
Sec. Litig., No. 93-3071,
1995 U.S. Dist. LEXIS 5717
(E.D. Pa. April 25, 1995)
5. In re Inacom Corp. Sec. $15.95 million 33.33%
Litig., No. 00-701 (D. Del.
Jan. 14, 2003)
6. Fields v. Biomatrix, Inc., $2.45 million 33.33%
No. 00-3541 (D.N.J. Dec. 2,
7. In re Gen. Instrument Sec. $48 million 33.33%
Litig., Civ. No. 01-3051,
2001 U.S. Dist. LEXIS
21578 (E.D. Pa. Dec. 27,
8. In re Safety Components $4.5 million 33.33%
Int'l, Inc. Sec. Litig.,
166 F. Supp.2d 72 (D.N.J. 2001)
9. In re Schein Pharm. Inc. $8 million 33.33%
Sec. Litig., No. 98-4311
(D.N.J. Dec. 7, 2000)
10. DiCiccio v. Am. Eagle $1.95 million 33.33%
Outfitters, Inc., Civ. No. 95-1937
(W.D. Pa. Dec. 12,
1996 1996) 1996)
11. Cullen v. Whitman Med. Corp., $7.2 million 33%
197 F.R.D. 136 (E.D.
12. In re AremisSoft Corp. $24 million 33%
Sec. Litig., 210 F.R.D. 109 (hypothetical value)
13. In re Unisys Corp. Sec. $5.75 million 33%
Litig., Civ. No. 99-5333,
2001 U.S. Dist. LEXIS
20160 (E.D. Pa. Dec. 6,
14. In re ATI Techs., Inc., $8 million 30%
Sec. Litig., Civ. No. 01-2541,
2003 U.S. Dist. ...