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IN RE LUCENT TECHNOLOGIES

July 19, 2004.

IN RE LUCENT TECHNOLOGIES, INC., SECURITIES LITIGATION, WARREN F. REINHART and GERALD M. SMITH, On Behalf Of Themselves and A Class Of Persons Similarly Situated, Plaintiffs,
v.
LUCENT TECHNOLOGIES, INC., ET. AL., Defendants. SANDRA BALABAN, On Behalf of Herself and and All Others Similarly Situated, Plaintiff, v. HENRY B. SCHACHT, RICHARD A. McGINN, DEBORAH C. HOPKINS, PAUL A. ALLAIRE, BETSY S. ATKINS, CARLA A. HILLS, FRANKLIN A. THOMAS, JOHN A. YOUNG, and LUCENT TECHNOLOGIES, INC., Defendants. ARTHUR LAUFER, Individually and On Behalf of All Others Similarly Situated, Plaintiff, v. LUCENT TECHNOLOGIES, INC., HENRY SCHACHT and DEBORAH HOPKINS, Defendants. GEORGE PALLAS, Derivatively on Behalf of Nominal Defendant LUCENT TECHNOLOGIES, INC., Plaintiff, v. HENRY B. SCHACHT, PAUL A. ALLAIRE, CARLA A. HILLS, DONALD K. PETERSON, FRANKLIN A. THOMAS, JOHN A. YOUNG, DEBORAH C. HOPKINS and RICHARD A. McGINN, Defendants, and LUCENT TECHNOLOGIES, INC., a Delaware Corporation, Nominal Defendant. EVA COOPER, Derivatively on Behalf of Nominal Defendant LUCENT TECHNOLOGIES, INC., Plaintiff, v. HENRY B. SCHACHT, PAUL A. ALLAIRE, CARLA A. HILLS, DONALD K. PETERSON, FRANKLIN A. THOMAS, JOHN A. YOUNG, DEBORAH C. HOPKINS and RICHARD A. McGINN, Defendants, and LUCENT TECHNOLOGIES, INC., a Delaware Corporation, Nominal Defendant.



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

AMENDED OPINION*fn1

I. Introduction

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.

  II. Discussion

  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. 1991)).

  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 benefitted;
(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 case; and
(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

  A. Gunter Analysis

  (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 vigorously challenged.

  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 Objections

  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 the presumption.

  (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 Benefitted

  "[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 omitted).

  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 Settlement.

  This factor favors the presumption that the requested fee is reasonable.

  (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 150.

  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 Case

  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, 2002)

 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, 2001)

 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)

 199 1996)

 1996)

 11. Cullen v. Whitman Med. Corp., $7.2 million 33% 197 F.R.D. 136 (E.D. Pa. 2000)

 12. In re AremisSoft Corp. $24 million 33% Sec. Litig., 210 F.R.D. 109 (hypothetical value) (D.N.J. 2002)

 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, 2001)

 14. In re ATI Techs., Inc., $8 million 30% Sec. Litig., Civ. No. 01-2541, 2003 U.S. Dist. ...


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