moore & leviant llp berns weiss llp williams cuker
TRANSCRIPT
Motion for Attorneys’ Fees and Costs, and Incentive Payments
CASE NO. 2:09-cv-05438-SJO (JCx)
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MOORE & LEVIANT LLP J. Mark Moore [email protected] 20700 Ventura Blvd., Suite 140 Woodland Hills, CA 91364 Tel.: (877) 360-7020 Fax: (310) 870-7020
BERNS WEISS LLP Jeffrey K. Berns (SBN 131351) [email protected] 20700 Ventura Boulevard, Suite 140 Woodland Hills, CA 91364 Tel.: (818) 961-2000 Fax: (818) 999-1500
WILLIAMS CUKER BEREZOFSKY LLC Mark R. Cuker (admitted Pro Hac Vice) [email protected] Michael J. Quirk (admitted Pro Hac Vice) [email protected] 1515 Market Street, Suite 1300 Philadelphia, PA 19102 Tel.: (215) 557-0099 Fax: (215) 557-0673
– and – Lee A. Weiss (admitted pro hac vice) [email protected] 585 Stewart Avenue, Suite L-20 Garden City, New York 11530 Tel.: (516) 222-2900 Fax: (818) 999-1500
Attorneys for Plaintiffs, the Certified Class, and the Certified BSRMC and TILA Subclasses [Additional counsel listed in signature block]
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
JOSEPH A. MONACO, ANITA M. MONACO, and JAMES BRANDT, individually and on behalf of all others similarly situated, Plaintiffs, v. BEAR STEARNS RESIDENTIAL MORTGAGE CORPORATION; BEAR STEARNS & CO.; EMC MORTGAGE CORPORATION; JP MORGAN CHASE & CO.; and DOES 1 through 200, inclusive,
Defendants.
CASE NO. 2:09-cv-05438-SJO (JCx) CLASS ACTION NOTICE OF MOTION AND MOTION FOR AWARD OF ATTORNEYS’ FEES AND COSTS, AND INCENTIVE PAYMENTS TO PLAINTIFFS; MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT THEREOF Hearing Date: February 3, 2014 Time: 10:00 a.m. Place: Courtroom 1 Judge: Hon. S. James Otero Complaint Filed: July 24, 2009 Trial Date: Vacated
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TO THE HONORABLE COURT, ALL PARTIES, AND THEIR
ATTORNEYS OF RECORD:
PLEASE TAKE NOTICE THAT, on February 3, 2014 at 10:00 a.m., Plaintiffs
and Class Representatives Joseph A. Monaco, Anita M. Monaco, and James Brandt
(“Plaintiffs”) will bring on for hearing before the Honorable S. James Otero, United
States District Judge, in Courtroom 1 – 2nd Floor, 312 North Spring Street, Los Angeles,
California 90012, this Motion for Award of Attorneys’ Fees and Costs, and Incentive
Payments to Plaintiffs.
The motion seeks an order:
(1) awarding attorneys’ fees and litigation costs to Class Counsel in the amount of
$5,490,000.00 pursuant to Section 3 of the proposed Settlement Agreement1 (the
“Settlement Agreement”) between Plaintiffs, on behalf of themselves, the Class, and the
TILA Subclass, and Defendants Bear Stearns Residential Mortgage Corporation
(“BSRMC”), Bear, Stearns & Co., n/k/a J.P. Morgan Securities LLC (“BS&Co”), EMC
Mortgage Corporation, n/k/a EMC Mortgage LLC (“EMC”), and JPMorgan Chase &
Co. (“JPMC”) (collectively, “Defendants,” and collectively with Plaintiffs, the
“Parties”); and
(2) awarding incentive payments in the amount of $5,000.00 to each of the
Plaintiffs pursuant to Section 3 of the Settlement Agreement for their time and effort
devoted to representing the interests of the Class and TILA Subclass.2 A proposed form
of Order awarding the proposed relief is submitted herewith.
1 The Settlement Agreement is attached as Exhibit 1 to the Declaration of Jeffrey K.
Berns (Dkt. 404-1) filed on August 30, 2013. 2 Capitalized terms herein shall have the same meaning as in the Settlement Agreement.
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For the reasons set forth in the attached Memorandum of Points and Authorities,
Plaintiffs respectfully submit that the Court should award the proposed attorneys’ fees
and litigation costs to Class Counsel, and award the proposed incentive payments to
Plaintiffs.
This Motion is based on the Notice of Motion; the attached Memorandum of
Points and Authorities; the accompanying Declaration of Jeffrey K. Berns, with exhibits;
the pleadings, orders, transcripts, and other papers on file in this matter; and any further
evidence and arguments as may be presented at the hearing of this matter.
Dated: December 2, 2013 BERNS WEISS LLP
By: /s/ Jeffrey K. Berns
Jeffrey K. Berns
20700 Ventura Blvd., Suite 140
Woodland Hills, CA 91364
Tel.: (818) 961-2000
Fax: (818) 999-1500
– and –
Lee A. Weiss (admitted pro hac vice)
585 Stewart Avenue, Suite L-20
Garden City, New York 11530
Tel.: (516) 222-2900
Fax: (818) 999-1500
MOORE & LEVIANT LLP
J. Mark Moore (SBN 180473)
20700 Ventura Blvd., Suite 140
Woodland Hills, CA 91364
Tel.: (877) 360-7020
Fax: (310) 870-7020
WILLIAMS CUKER BEREZOFSKY
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Mark R. Cuker (admitted pro hac vice)
Michael J. Quirk (admitted pro hac vice)
1515 Market Street, Suite 1300
Philadelphia, PA 19103-1819
Tel.: (215) 557-0099
Fax: (215) 557-0673
ARBOGAST BOWEN LLP
David M. Arbogast
Chumahan B. Bowen
11400 W. Olympic Blvd., 2nd Floor
Los Angeles, CA 90064
Tel.: (310) 477-7200
Fax: (310) 943-2309
Attorneys for Plaintiffs, the Certified Class,
and the Certified BSRMC and TILA
Subclasses
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TABLE OF CONTENTS
Page
I. INTRODUCTION ............................................................................................ 1
II. HISTORY OF LITIGATION ........................................................................... 2
A. Summary of the Case and Procedural History ....................................... 2
B. Summary of the Case and Procedural History ....................................... 3
C. Discovery ................................................................................................ 5
D. Settlement Negotiations, Mediation and Settlement .............................. 6
III. ARGUMENT .................................................................................................... 7
A. The Court Should Approve the Fees and Costs Application as Fair and Reasonable ....................................................................................... 7
1. The Percentage-of-the-Recovery Method is the Appropriate Basis for Determining Attorneys’ Fees ....................................... 8
2. The Fees and Costs Award Sought Herein is Reasonable as a Percentage of the Settlement Fund .............................................. 8
(a) Results Achieved ............................................................... 9
(b) Quality of Work Performed ............................................. 12
(c) Skill Required .................................................................. 15
(d) Risks of Litigation ........................................................... 16
(e) Contingent Nature of the Fee........................................... 19
3. A Lodestar Cross-Check Easily Supports the Reasonableness of the Requested Reward ........................................................... 20
4. Plaintiffs’ Counsel Should Be Awarded Costs .......................... 22
B. The Court Should Approve the Proposed Incentive Payments to Plaintiffs ............................................................................................... 23
IV. CONCLUSION ............................................................................................... 25
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TABLE OF AUTHORITIES
Page(s)
Federal Cases Craft v. Cnty. of San Bernardino 624 F. Supp. 2d 1113 (C.D. Cal. 2008) ......................................................... 21 Fernandez v. Victoria Secret Stores, LLC No. CV 06-04149 MMM SHX, 2008 WL 8150856 (C.D. Cal. July 21, 2008) ............................................................................... 12 Garner v. State Farm Mut. Auto. Ins. Co. No. CV 08 1365 CW EMC, 2010 WL 1687832 (N.D. Cal. Apr. 22, 2010) .............................................................................. 11 Gibson & Co. Ins. Brokers, Inc. v. Jackson Nat. Life Ins. Co. No. CV06- 5342 DSF (SHX), 2008 WL 618893 (C.D. Cal. Feb. 27, 2008) .............................................................................. 24 Hanlon v. Chrysler Corp. 150 F.3d 1011 (9th Cir. 1998) ................................................................... 8, 22 Hensley v. Eckerhart 461 U.S. 424 (1983)....................................................................................... 10 Hughes v. Microsoft Corp. Nos. C98-1646C, C93-0179C, 2001 WL 34089697 (W.D. Wash. Mar. 26, 2001) ......................................................................... 23 In re Activision Sec. Litig. 723 F. Supp. 1373 (N.D. Cal. 1989) .......................................................... 9, 12 In re Bluetooth Headset Prod. Liability Litig. 654 F.3d 935 (9th Cir. 2011) ................................................................. 8, 9, 21 In re Brand Name Prescription Drugs Antitrust Litig. 186 F.3d 781 (7th Cir. 1999) ......................................................................... 18 In re Equity Funding Corp. of Am. Sec. Litig. 438 F. Supp. 1303 (C.D. Cal. 1977) .............................................................. 15 In re Lorazepam & Chlorazepate Antitrust Litig. 205 F.R.D. 369 (D.D.C. 2002) ................................................................ 23, 24
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TABLE OF AUTHORITIES (cont’d)
Page(s)
In re Lorazepam & Chlorazepate Antitrust Litig. Nos. MDL 1290 (TFH), 99MS276 (TFH), Civ. 99-0790 (TFH), 2003 WL 22037741 (D.D.C. June 16, 2003) ................................................ 20
In re Mego Fin. Corp. Sec. Litig. 213 F.3d 454 (9th Cir. 2000) ................................................................... 23, 24 In re Nuvelo, Inc. Sec. Litig. No. C 07-04056 CRB, 2011 WL 2650592 (N.D. Cal. July 6, 2011) ............ 12 In re Omnivision Technologies, Inc. 559 F. Supp. 2d 1036 (N.D. Cal. 2008) ........................................................... 9 In re Pacific Enterprises Sec. Litig. 47 F.3d 373 (9th Cir. 1995) ........................................................................... 16 In re TFT-LCD (Flat Panel) Antitrust Litig. No. M 07-1827 SI, 2013 WL 1365900 (N.D. Cal. April 3, 2013) ................ 24 In re Wachovia Corp. “Pick-a-Payment” Mortg. Mktg. and Sales Pract’s Litig. No. 5:09-md-02015-JF, 2011 WL 1877630 (N.D. Cal. May 17, 2011) ....... 24 In re Washington Public Power Supply Sys. Sec. Litig. 19 F.3d 1291 (9th Cir. 1994) ..................................................................... 8, 20 Johnson v. General Mills, Inc. No. SACV 10-00061-CJC(ANx), 2013 WL 3213832 (C.D. Cal. June 17, 2013) .............................................................................. 12 Linney v. Cellular Alaska P’ship 151 F.3d 1234 (9th Cir. 1998) ....................................................................... 10 MCI Commc’ns Corp. v. Am. Tel. & Tel. Co. 708 F.2d 1081 (7th Cir. 1983) ....................................................................... 19 McPhail v. First Command Fin. Planning, Inc. No. 05cv179-IEG-JMA, 2009 WL 839841 (S.D. Cal. Mar. 30, 2009) ......... 12 Multi-Ethnic Immigrant Workers Org. Network v. City of Los Angeles No. CV 07-3072 AHM FMMX, 2009 WL 9100391 (C.D. Cal. June 24, 2009) .............................................................................. 12
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TABLE OF AUTHORITIES (cont’d)
Page(s)
Nichols v. SmithKline Beecham Corp. No. Civ.A.00-6222, 2005 WL 950616 (E.D. Pa. Apr. 22, 2005) .................. 10 Presley v. Carter Hawley Hale Profit Sharing Plan No. C9704316SC, 2000 WL 16437 (N.D. Cal. Jan. 7, 2000) ....................... 24 United States Football League v. National Football League 644 F. Supp. 1040 (S.D.N.Y. 1986) .............................................................. 19 Van Vranken v. Atlantic Richfield Co. 901 F. Supp. 294 (N.D. Cal. 1995) ................................................................ 24 Vasquez v. Coast Valley Roofing, Inc. 266 F.R.D. 482 (E.D. Cal. 2010) ..................................................................... 9 Vincent v. Hughes Air West 557 F.2d 759 (9th Cir. 1977) ......................................................................... 22 Vizcaino v. Microsoft Corp. 142 F. Supp. 2d 1299 (W.D. Wash. 2001) ........................................ 15, 16, 21 Vizcaino v. Microsoft Corp. 290 F.3d 1043 (9th Cir. 2002) ....................................................... 9, 11, 19, 21 State Cases Boschma v. Home Loan Ctr., Inc. 198 Cal. App. 4th 230 (2011) ........................................................................ 17 Rebney v. Wells Fargo Bank 220 Cal. App. 3d 1117 (1990) ....................................................................... 10 Serrano v. Priest 20 Cal. 3d 25, 35 (1977) ................................................................................ 22 Wershba v. Apple Computer, Inc. 91 Cal. App. 4th 224 (2001) .................................................................... 10, 21
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TABLE OF AUTHORITIES (cont’d)
Page(s)
Statutes Cal. Bus. & Prof. Code § 17203 .............................................................................. 17 Other Authorities Theodore Eisenberg & Geoffrey P. Miller, Incentive Awards to Class Action Plaintiffs: An Empirical Study, 53 UCLA L. Rev. 1303, 1333 (2006) ................... 24
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MEMORANDUM OF POINTS AND AUTHORITIES
I. INTRODUCTION
By this motion, Plaintiffs and Class Representatives Joseph A. Monaco, Anita M.
Monaco, and James Brandt (collectively, “Plaintiffs”) request the Court to approve a
combined award of attorneys’ fees and litigation costs in the amount of $5,490,000.00 to
Class Counsel, and incentive payments in the amount of $5,000.00 to each of the
Plaintiffs. The settlement achieved herein, which was agreed to less than two months
before the action was scheduled to proceed to trial, provides substantial cash payments
to Settlement Class Members, some of whom will receive in excess of $5,600.
The request for attorneys’ fees and costs to be awarded as a percentage of the total
Settlement Amount is supported by well-established Ninth Circuit precedent. The
proposed $5,490,000.00 award is 30% of the $18,300,000.00 Settlement Fund under the
Settlement Agreement, inclusive of expenses. Although the requested amount is slightly
above the Ninth Circuit’s 25% benchmark, it is appropriate and particularly justified
under the circumstances of this litigation and proposed settlement. The proposed award
recognizes Class Counsel’s extensive efforts over four years of litigation against
Defendants Bear Stearns Residential Mortgage Corporation (“BSRMC”), Bear, Stearns
& Co., n/k/a J.P. Morgan Securities LLC (“BS&Co”), EMC Mortgage Corporation,
n/k/a EMC Mortgage LLC (“EMC”), and JPMorgan Chase & Co. (“JPMC”)
(collectively, “Defendants;” and collectively with Plaintiffs, as the “Parties”) that have
resulted in a recovery of over $18,300,000.00 for the Class and TILA Subclass in the
face of significant risks that could have resulted in, and, if the parties’ settlement is not
approved, could still result in, far lower or even no recoveries for individual Class and
TILA Subclass Members. Moreover, the proposed fees and costs award is also supported
when applying the lodestar and multiplier methodology. As delineated below, Class
Counsel’s substantial work was necessary to achieve this result and the resulting
multiplier of 1.34 of the lodestar is more than fair and reasonable in light of the result
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Class Counsel have achieved on behalf of the Class and the BSRMC TILA Subclass, the
complex nature of this litigation, and the high degree of risk that Class Counsel assumed
in undertaking and litigating this action. The proposed Settlement Agreement provides
substantial and immediate cash relief for individual Class and TILA Subclass Members,
the vast majority of whom, but for this litigation, would have received nothing for their
legal claims in this action. Thus, Plaintiffs’ request for an award of attorneys’ fees and
litigation costs in the amount of $5,490,000.00 is fair and reasonable, and should be
approved.
So too should the Court approve the proposed incentive payments of $5,000.00 to
each of the Plaintiffs for their efforts in representing the Class and TILA Subclass and
enabling the substantial recovery under the Settlement Agreement. The proposed awards
combined represent less than 0.1% of the Settlement Fund, and are far lower than awards
to class representatives that this Court and others have approved. In light of the
substantial efforts that the Plaintiffs have devoted as representatives of the Class and
TILA Subclass for over four years, including answering all of Class Counsel’s queries,
producing documents, responding to written discovery, sitting for depositions, and
reviewing documents, including the Settlement Agreement, the proposed incentive
payments of $5,000.00 to each Plaintiff are imminently reasonable in the context of this
Settlement Agreement and should be approved.
II. HISTORY OF LITIGATION
A. Summary of the Case and Procedural History
This action concerns alleged material nondisclosures in the loan documents for
Option ARM Loans that were purchased or otherwise acquired by EMC.
Plaintiffs filed their initial action on August 28, 2007, case number CV-07-3454
(“the prior case”) against BSRMC and BS&Co. After several rounds of pleadings,
Plaintiffs filed a class certification motion, and, while the parties were in settlement
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discussions, defendants missed their deadline to oppose the motion. In order to continue
settlement discussions without the threat that the class certification motion could be
granted on default, Plaintiffs and Defendants in the prior case entered into a stipulation
providing that Plaintiffs’ claims would be tolled until July 29, 2009 and that Plaintiffs
would dismiss their action. On February 5, 2009, the Court entered an order dismissing
the prior case without prejudice pursuant to the stipulation. Thereafter, the parties
continued their settlement negotiations, which were ultimately unsuccessful at that time.
See accompanying Declaration of Jeffrey K. Berns (“12/2/13 Berns Decl.”), ¶4.
Plaintiffs filed this case on July 24, 2009 (the “Action”) against The Bear Stearns
Companies, Inc., BSRMC, BS&Co., EMC, and JPMC alleging claims against some or
all of the Defendants for fraudulent omissions, violations of the UCL and TILA, breach
of contract, and breach of the implied covenant of good faith and fair dealing. Because
the Action was related to the prior case, it was transferred to this Court on August 12,
2009 pursuant to General Order 08-05. See 12/2/13 Berns Decl., ¶5.
After substantial motion practice, including multiple motions to dismiss and
amendments of the complaint, on January 13, 2011, the Court granted Plaintiffs’ motion
to reconsider its May 13, 2010 Order, which allowed Plaintiffs to amend all of their
claims that had been previously dismissed with prejudice. On September 12, 2011, after
Plaintiffs had filed their second amended complaint, the Court denied BSRMC’s motion
to dismiss in its entirety, and denied in part the non-originator defendants’ motion to
dismiss, thus preserving Plaintiffs’ fraudulent omission and UCL claims against EMC,
JPMC, and BS&Co., and breach of contract claim against JPMC. Subsequently,
Plaintiffs filed the operative Third Amended Class Action Complaint on October 6, 2011
(“Complaint”) (Dkt. 185), which only alleged the claims that had been sustained by the
Court in its September 12, 2011 Order. 12/2/13 Berns Decl., ¶6.
B. Class Certification and Summary Judgment Motions
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On March 2, 2012, Plaintiffs filed a motion to certify a class to pursue the UCL
claim against all Defendants and a BSRMC Subclass to pursue the contract and TILA
claims (the “Class Certification Motion”) against BSRMC. Dkt. 212, as corrected by
stipulation on March 14, 2012, Dkt. 222. On September 26, 2012, the Court granted the
Class Certification Motion with respect to the Class’s UCL claim and the BSRMC
Subclass’s TILA claim, but denied without prejudice the Class Certification Motion with
respect to the BSRMC Subclass claim for breach of contract (the “Class Certification
Order”). Dkt. 260. The Court also appointed Berns Weiss LLP, Williams Cuker
Berezofsky, Spiro Moore LLP,3 and Arbogast Bowen LLP as Class Counsel. Pursuant to
the Class Certification Order, the Class and Subclasses are defined as follows:
Class: All individuals who, from August 28, 2003 through March 29, 2013, have or had an Option ARM Loan that was purchased or otherwise acquired by EMC Mortgage Corporation, which was secured by real property in the State of California and not originated by a federal savings association. The Monaco Class is defined to include only those loans that had the following characteristics: (i) the “Interest Rate” paragraph of the Note (¶ 2) states both (1) a “yearly” Interest Rate that is less than the index plus the margin; and (2) that the Interest Rate “may” rather than “will” change; (ii) the “Initial Monthly Payment” listed in the Note is based upon the yearly interest rate listed in paragraph 2; (iii) the Note does not contain any statement that after the first Interest Rate Change Date, paying the amount listed as the “Initial Monthly Payment” “will” result in negative amortization or deferred interest. Excluded from this Class are Defendants’ employees, officers, directors, agents, representatives, and their family members, as well as the Court and its officers, employees, and relatives, located in the United States of America, and borrowers who fall within the foregoing class definition whose loans were originated by Lending 1st Mortgage before being acquired by EMC, as those loans are part of the certified class in Plascencia v. Lending 1st Mortg., et al., Case No. C-07-4485 CW (N.D. Cal.). BSRMC Subclass:
3 In September of 2013, J. Mark Moore, the partner at Spiro Moore LLP who was
responsible for this litigation, left Spiro Moore and became a member of Moore &
Leviant LLP.
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All members of the Class whose loans were originated by BSRMC. BSRMC TILA Subclass: All members of the Class whose loans were originated on or after August 28, 2006 by defendant BSRMC.
On October 10, 2012, Defendants filed with the U.S. Court of Appeals for the Ninth
Circuit a petition for permission to appeal the Class Certification Order pursuant to Fed.
R. Civ. P. 23(f), which was denied on December 14, 2012. Dkt. 289. 12/2/13 Berns
Decl., ¶7.
On October 15, 2012, Plaintiffs filed a renewed motion to certify a BSRMC
Breach of Contract Subclass (Dkt. 261), which was denied on December 10, 2012 (Dkt.
285). 12/2/13 Berns Decl., ¶8.
On March 25, 2013, Plaintiffs filed a Motion for Partial Judgment on the
Pleadings seeking judgment as to certain of Defendants’ affirmative defenses to the
Complaint. Dkt. 300. On April 1, 2013, BSRMC and JPMC moved for partial summary
judgment (Dkt. 304), EMC and BS&Co. moved for summary judgment (Dkt. 305), and
Plaintiffs moved for partial summary judgment (Dkt. 306). On April 8, 2013, Defendants
moved to decertify the UCL class claims. Dkt. 319. 12/2/13 Berns Decl., ¶9.
On April 24, 2013, the Court granted in part and denied in part Plaintiffs’ motion
for partial judgment on the pleadings, dismissing Defendants’ Tenth, Eleventh,
Fourteenth, Forty-Sixth, and Fiftieth Defenses, and limiting the applicability as to their
Fourth, Fifth, and Twenty-Fifth Defenses. Dkt. 359. Upon the Parties’ stipulations, the
Court deferred ruling on the remaining summary judgment motions and the motion for
decertification, and subsequently took the matters off calendar pending the Court’s
consideration of the proposed settlement. Dkt. 394, 396. 12/2/13 Berns Decl., ¶10.
C. Discovery
The Parties engaged in extensive discovery throughout the course of this
litigation. From July 2009 to the present, Plaintiffs served numerous sets of written
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discovery on Defendants, including five sets of requests for production of documents on
BSRMC, BS&Co., and JPMC, six sets of requests for production of documents on EMC.
This discovery resulted in the production of nearly 3 million pages of documents,
including extensive spreadsheets containing thousands of rows of data on loans by class
members, all of which were carefully reviewed. Each of the Plaintiffs also responded to
two sets of interrogatories and requests for production of documents. 12/2/13 Berns
Decl., ¶11.
In addition to written discovery, significant deposition discovery took place.
Plaintiffs were each deposed by Defendants. Plaintiffs in turn twice deposed Defendants’
corporate designee, Mary Haggerty, as well as five other individuals (Tom Marano,
Sandy McGowan, Jeff Verschleiser, Megan Fay, and Michael Nierenberg) who were
identified by Ms. Haggerty as having relevant knowledge and also extensively
interviewed Jeffrey Mayer, the immediate superior of Marano, in the telephonic
presence of defense counsel. Plaintiffs also took the deposition of Defendants’ expert
witness, Joffrey G. Long. Additionally, Plaintiffs and Defendants took the depositions of
three non-party witnesses (Steven Tirella, Steven Espinoza, and David Alimi). 12/2/13
Berns Decl., ¶12.
Plaintiffs retained two expert witnesses -- Neil Fligstein, who provided a report on
Defendants’ organizational structure in originating, securitizing, and selling Option
ARM Loans and mortgage-backed securities, and Greg J. Regan, who provided three
reports on the negative amortization experienced by class members. 12/2/13 Berns Decl.,
¶13.
D. Settlement Negotiations, Mediation and Settlement
In December 2011, the Parties participated in a mediation session before the Hon.
Edward A. Infante, which did not result in a settlement. On May 22, 2013, the Parties
participated in mediation in Philadelphia, Pennsylvania before the Hon. Diane M. Welsh
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(Ret.) of JAMS, and continued having settlement discussions thereafter with Judge
Welsh's assistance. Ultimately, an agreement in principle, which is now embodied in the
Settlement Agreement, was reached. 12/2/13 Berns Decl., ¶15.
Defendants have denied and continue to deny the allegations of the Complaint,
and deny that Plaintiffs, the Class, and Subclasses have been harmed by any act or
omission of Defendants. Settlement Agreement at 4. Nevertheless, the Parties agree that
it is in their best interests to compromise the claims raised by the Complaint and to end
the litigation due to their desire to avoid the expense, delay and risks of continued
litigation, including motion practice and trial, and they desire to compromise the claims
of the Class and Subclasses against Defendants, upon the terms and conditions set forth
in the Settlement Agreement. Id.
The Settlement Agreement provides for Defendants to pay a total of $18,300,000
for payments to Class Members who are not Successful Opt-Outs, payments to TILA
Subclass Members, Incentive Payments to Plaintiffs, if any, the Attorneys’ Fees and
Costs Award, if any, and for all Settlement Administration Costs. Settlement Agreement,
§§ 1.24, 1.28, 2.2. After the entry of the Preliminary Approval Order, Defendants
disbursed to the Settlement Administrator $37,500 of the Settlement Fund to be used
exclusively for Settlement Administration Costs, including but not limited to the costs of
mailing the Individual Class Notice to the Class Members, providing the checks to
eligible Class Members, and responding to inquiries from Class Members. The
Settlement Administrator agreed to cap its fee at $75,000 for its services and these costs.
Id., §§ 1.22, 4.1.
III. ARGUMENT
A. The Court Should Approve the Fees and Costs Application as Fair and Reasonable.
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1. The Percentage-of-the-Recovery Method is the Appropriate Basis for Determining Attorneys’ Fees.
Here, the attorneys’ fees and costs award should be based on a percentage of the
total Settlement Fund since the Settlement Agreement provides entirely for monetary
relief to be paid to the Class and TILA Subclass. As the Ninth Circuit recently
explained, “[b]ecause the benefit to the class is easily quantified in common-fund
settlements, we have allowed courts to award attorneys a percentage of the common
fund in lieu of the often more time-consuming task of calculating the lodestar.” In re
Bluetooth Headset Prod. Liability Litig., 654 F.3d 935, 942 (9th Cir. 2011).
Although the Court has discretion to utilize either the percentage-of-the-fund or
the lodestar method for awarding attorneys’ fees and costs, In re Washington Public
Power Supply Sys. Sec. Litig. (“In re WPPSS”), 19 F.3d 1291, 1295 (9th Cir. 1994), the
better exercise of the Court’s discretion here would be to utilize the percentage method
because the Settlement Agreement’s sole provision of monetary relief makes settlement
valuation and application of the percentage method a more straightforward undertaking.
Compare In re Bluetooth, 654 F.3d at 942 (“[T]he benefit to the class is easily quantified
in common-fund settlements . . . .”); with Hanlon v. Chrysler Corp., 150 F.3d 1011,
1029 (9th Cir. 1998) (“We note, however, that the [district] court rejected the idea of a
straight percentage recovery because of its uncertainty as to the valuation of the
settlement.”). Since the Settlement Agreement here has a certain and readily
determinable value, the percentage-of-the-fund method is the most appropriate basis for
awarding attorneys’ fees and costs.
2. The Fees and Costs Award Sought Herein is Reasonable as a Percentage of the Settlement Fund.
The proposed attorneys’ fees and expenses reimbursement award of
$5,490,000.00 represents exactly 30% of the $18,300,000.00 Settlement Fund and is
reasonable given the circumstances of the case. Because of Plaintiffs’ expenses, the fee
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award sought represents less than 30% of the Settlement Fund. Although the Ninth
Circuit has established a 25% benchmark, in most common fund cases, the award
exceeds th[e] benchmark.” See, e.g., In re Omnivision Technologies, Inc., 559 F. Supp.
2d 1036, 1047 (N.D. Cal. 2008). Percentage awards of close to 30 percent are, in fact,
typical. See In re Activision Sec. Litig., 723 F. Supp. 1373, 1377 (N.D. Cal. 1989) (“This
court's review of recent reported cases discloses that nearly all common fund awards
range around 30% even after thorough application of either the lodestar or twelve-factor
method.”); Vizcaino v. Microsoft Corp., 290 F.3d 1043, 1047 (9th Cir. 2002) (“Vizcaino
II”) (“The district court based its percentage award on Bowles, which states that ‘[i]n
common fund cases, the ‘benchmark’ award is 25 percent of the recovery obtained,' with
20–30% as the usual range ... [The] Ninth Circuit cases echo this approach.”). A district
court may depart from the 25% benchmark after providing adequate explanation of
“special circumstances” so justifying. See In re Bluetooth Headset Prods. Liab. Litig.,
654 F.3d at 942.
“When assessing whether the percentage requested is reasonable, courts look to
factors such as: (a) the results achieved; (b) the risk of litigation; (c) the skill required;
(d) the quality of work; (e) the contingent nature of the fee and the financial burden; and
(f) the awards made in similar cases.” Vasquez v. Coast Valley Roofing, Inc., 266 F.R.D.
482, 492 (E.D. Cal. 2010) (citing Vizcaino II, 290 F.3d at 1047, and Six (6) Mexican
Workers v. Arizona Citrus Growers, 904 F.2d 1301 (9th Cir. 1990)). All of these factors
strongly support the proposed 30%, or $5,490,000.00, fees and costs award here.
(a) Results Achieved
The results achieved in this extremely high-risk litigation are excellent. The
Settlement Agreement creates an $18,300,000.00 settlement fund, from which all Class
Members who can be located and who do not opt out will receive cash payments
ranging, at a minimum, from approximately $505 to over $5,600. Settlement Agreement,
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§ 12.1, Exhibit E. Under any measure, this is a substantial recovery for the Class and
TILA Subclass as a whole, and individually for the approximately 5,045 Class Members
and approximately 1,935 TILA Subclass Members. See 12/2/13 Berns Decl., ¶¶14-21. In
assessing the results achieved through a class action settlement for purposes of awarding
attorneys’ fees and costs, the Court must “recognize that ‘settlement represents a
compromise in which the highest hopes for recovery are yielded in exchange for
certainty and resolution and guard against demanding too large a settlement . . . .’”
Nichols v. SmithKline Beecham Corp., No. Civ.A.00-6222, 2005 WL 950616, at *15
(E.D. Pa. Apr. 22, 2005) (quoting In re General Motors Corp. Pick-Up Truck Fuel Tank
Prod’s Liab. Litig., 55 F.3d 768, 806 (3d Cir. 1995)).
Moreover, a settlement is not judged against what might have been recovered had
the plaintiff prevailed at trial; nor does the settlement need to provide anywhere near
100% of the damages sought to be fair and reasonable. Linney v. Cellular Alaska P’ship,
151 F.3d 1234, 1242 (9th Cir. 1998); Wershba v. Apple Computer, Inc., 91 Cal. App. 4th
224, 246 and 250 (2001); Rebney v. Wells Fargo Bank, 220 Cal. App. 3d 1117, 1139
(1990). “Compromise is inherent and necessary in the settlement process . . . . [E]ven if
the relief afforded by the proposed settlement is substantially narrower than it would be
if the suits were to be successfully litigated, this is no bar to a class settlement because
the public interest may indeed be served by a voluntary settlement in which each side
gives ground in the interest of avoiding litigation.” Wershba, 91 Cal. App. 4th at 250
(citing Air Lines Stewards & Stewardesses Ass'n Local 550 v. Am. Airlines, Inc., 455
F.2d 101, 109 (7th Cir. 1972)). Ultimately, courts have consistently recognized that the
result achieved is a major factor to be considered in making a fee award. Hensley v.
Eckerhart, 461 U.S. 424, 436 (1983) (the “most critical factor is the degree of success
obtained”).
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Here, the relief afforded by the Settlement Agreement is substantial in light of the
obstacles the litigation presented and thus strongly supports the proposed 30% fees and
costs award. Indeed, Class Counsel filed this case in the absence of any supporting
precedent and faced substantial risks in pursuing the litigation against Defendants for
over five years, including risks of decertification, as well as risk associated with the
Class’s ability to obtain restitution under the UCL for the undisclosed or inadequately
disclosed negative amortization at the heart of the Class’s UCL claims. 12/2/13 Berns
Decl., ¶¶22-26. In the face of these risks, the Settlement Agreement’s recovery of
$18,300,000.00 represents a substantial, arguably extraordinary, result. And,
importantly, this amount was agreed upon only “after protracted arms-length and
adversarial negotiation, during which time an experienced impartial mediator helped the
Parties arrive at a compromise amount that both Parties find satisfactory.” Garner v.
State Farm Mut. Auto. Ins. Co., No. CV 08 1365 CW EMC, 2010 WL 1687832, at *11
(N.D. Cal. Apr. 22, 2010).
To ensure that Settlement payments are related to the amount of negative
amortization (the primary source of restitution sought) incurred by Class members, the
Payment Schedule set forth in the Settlement Agreement is based upon the original
principal amount of the loan and the time period for which the Class member made
regular monthly payments on account of the loan, and will be adjusted to take into
account successful opt-outs and Class members who could not be located despite
reasonable efforts.
Under similar circumstances, the Ninth Circuit has upheld awards in excess of its
25% benchmark. See Vizcaino II, 290 F.3d at 1046-50 (affirming district court’s award
of 28% of a $96,885,000.00 class action settlement fund ($27,127,800.00) for attorneys’
fees, finding that class counsel had “pursued this case in the absence of supporting
precedents” and in the face of other serious obstacles, and compiling list of 34 other
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cases in which courts approved awards of attorneys’ fees that were equal to or greater
than 25% of settlement funds ranging from $50,000,000.00 to $200,000,000.00). As in
Vizcaino, Class Counsel undertook representation in this litigation in the absence of
controlling or supporting precedents and in the face of significant risks (discussed in
more detail below). See also Johnson v. General Mills, Inc., No. SACV 10-00061-
CJC(ANx), 2013 WL 3213832, at *6 (C.D. Cal. June 17, 2013) (finding a fee award of
30% of an $8.5 million common fund was reasonable given that class counsel was
requesting only 36% of their total lodestar, the “action involved complex scientific
evidence and the use of expensive experts,” and no class member objected to the
settlement); McPhail v. First Command Fin. Planning, Inc., No. 05cv179-IEG-JMA,
2009 WL 839841 (S.D. Cal. Mar. 30, 2009) (awarding fees of 30% of the first $10
million of the settlement fund and 25% of the remaining $2 million in consideration that
the result achieved was 7% of the estimated damages, “the risks of litigation were real
and substantial,” “the complexity and duration of the case, coupled with the intensity of
the negotiations, mitigated in favor of approval,” and “Class Counsel took this case
under a contingent fee basis, advanced all costs in the litigation, and had to forego other
financial opportunities”); In re Activision, 723 F. Supp. 1373 (awarding fees equivalent
to 32.8% of the settlement fund); In re Nuvelo, Inc. Sec. Litig., No. C 07-04056 CRB,
2011 WL 2650592 (N.D. Cal. July 6, 2011) (awarding 30% of fund, finding it
reasonably compares to other awards for a $10 million settlement); Fernandez v.
Victoria Secret Stores, LLC, No. CV 06-04149 MMM SHX, 2008 WL 8150856 (C.D.
Cal. July 21, 2008) (awarding 34% of the common fund); Multi-Ethnic Immigrant
Workers Org. Network v. City of Los Angeles, No. CV 07-3072 AHM FMMX, 2009 WL
9100391 (C.D. Cal. June 24, 2009) (awarding 31% of the $12,850,000 settlement
amount).
(b) Quality of Work Performed
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Throughout the course of the litigation, the quality of the legal work performed by
Class Counsel has been of the highest caliber.
(i) Investigation and Development of Facts
From the outset, Class Counsel undertook substantial effort to develop the facts to
support a convincing case. Before the initial complaint was filed, Class Counsel began
investigating what claims, if any, could be properly alleged on behalf of Plaintiffs and
putative class members. 12/2/13 Berns Decl., ¶¶2-3. These claims and issues, which
would play out through both the extensive Rule 12(b)(6) and Rule 23 litigation, first
arose in connection with Class Counsel’s thorough review and analysis of loans
originated by Defendants, including the relevant disclosure documents, and of the
applicable federal and state laws governing the liability of both mortgage loan
originators and the subsequent purchasers of mortgage loans.
Plaintiffs also sought extensive written and deposition discovery in the case. For
example, Plaintiffs served several sets of written discovery on Defendants, including
five sets of requests for production of documents on BSRMC, BS&Co., and JPMC, six
sets of requests for production of documents on EMC, resulting in the production of
nearly 3 million pages of documents, which were carefully reviewed. Plaintiffs also
responded to two sets of interrogatories and requests for production of documents.
12/2/13 Berns Decl., ¶11.
In addition to this written discovery, Plaintiffs were each deposed. Class Counsel
in turn twice deposed Defendants’ corporate designee, Mary Haggerty, deposed five
individuals identified by Ms. Haggerty as having relevant knowledge on topics identified
in Plaintiffs’ Notice of Deposition of Corporate Designee, deposed one of Defendant’s
experts, and deposed three non-party witnesses. Id., ¶12.
Plaintiffs also retained two expert witnesses -- Neil Fligstein, who provided a
report on Defendants’ organizational structure in originating, securitizing, and selling
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Option ARM Loans and mortgage-backed securities, and Greg J. Regan, who provided
three reports on the negative amortization experienced by class members. 12/2/13 Berns
Decl., ¶13.
(ii) Extensive Motion Practice
The motion practice and briefing in this litigation have been extensive. Plaintiffs
and Class Counsel opposed a total of five motions to dismiss and moved the Court to
reconsider its May 13, 2010 Order. See 12/2/13 Berns Decl., ¶6. After successfully
fending off Defendants’ Rule 12(b)(6) motions, Plaintiffs successfully moved for
certification of the Class and BSRMC TILA Subclasses. Id., ¶7. Plaintiffs also filed an
opposition brief to Defendants’ petition for permission to appeal the Court’s September
27, 2012 Class Certification Order. Id. Plaintiffs also successfully moved for partial
judgment on the pleadings against certain of Defendants’ affirmative defenses to the
Complaint. Id., ¶¶9-10. Additionally, Plaintiffs had moved for summary judgment, and
had opposed Defendants’ cross-summary judgment motions and motion for
decertification. Id.
(iii) Settlement Negotiations
Class Counsel’s successes throughout the foregoing stages of litigation, spanning
over four years from the filing of the initial complaint in this action to the date of the
settlement agreement, brought Defendants to the settlement table. Although the Parties
participated in an unsuccessful mediation in December 2011, the Parties participated in
another mediation session on May 22, 2013 in Philadelphia, Pennsylvania before the
Hon. Diane M. Welsh (Ret.) of JAMS, and continued having settlement discussions
thereafter with Judge Welsh's assistance. 12/2/13 Berns Decl., ¶15. In preparation for the
settlement negotiations, Class Counsel prepared and presented a detailed mediation brief
analyzing the evidence against Defendants and potential damages/restitution
computations. Id.
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(c) Skill Required
(i) Complexity and Difficulty of the Issues
This is a novel, complex case that has required Class Counsel to confront the
many difficult legal and factual issues set forth herein. These include the federal and
state legal frameworks for establishing secondary liability in cases like this where the
subsequent purchaser of mortgage loans, rather than the loan originators, is the driving
force behind the predatory and deceptive lending practices being challenged, the
“commonality” and “predominance” requirements of Fed. R. Civ. P. 23(a) and (b)(3) as
they apply to certification of a class comprised of borrowers from 57 mortgage loan
originators, and the difficult and disputed question of whether negative amortization
incurred as a result of disclosed but artificially low monthly mortgage payments
constitutes available restitution under the California UCL. See 12/2/13 Berns Decl.,
¶¶23-25.
Courts have recognized that the novelty and difficulty of issues in a case are
significant factors to be considered in making a fee award. See, e.g., Vizcaino v.
Microsoft Corp., 142 F. Supp. 2d 1299, 1306 (W.D. Wash. 2001) (“Vizcaino I”). Here,
Plaintiffs and Class Counsel have achieved significant successes in litigating these issues
to date, which have resulted in the substantial monetary relief provided to the Class and
Subclasses under the Settlement Agreement. Class Counsel’s successes on these difficult
and complex litigation issues weigh strongly in favor of the proposed fees and costs
award.
(ii) High Caliber of Opposing Counsel
The caliber of opposing counsel is another important factor in assessing the
quality of Class Counsel’s representation of the Class and Subclasses. See, e.g., Vizcaino
I, 142 F. Supp. 2d at 1303; In re Equity Funding Corp. of Am. Sec. Litig., 438 F. Supp.
1303, 1336-37 (C.D. Cal. 1977). Here, Class Counsel was opposed by attorneys from
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several well-regarded law firms who were representing sophisticated clients. Despite
facing such heavily funded adversaries, Class Counsel achieved an outstanding result for
the Class and BSRMC TILA Subclass by virtue of the Settlement Agreement’s
$18,300,000.00 settlement fund and the cash benefits provided therein for Class
Members. Class Counsel’s achievement of this result against highly skilled opposing
counsel backed by massive resources likewise supports the 30% fees and costs award
sought herein.
(d) Risks of Litigation
Risk is likewise an important factor in assessing the fairness and reasonableness of
a class action settlement fee and cost award. See, e.g., Vizcaino I, 142 F. Supp. 2d at
1303-04. Indeed, courts in the Ninth Circuit have recognized that a high risk factor is
one reason for increasing attorneys’ fee awards above the 25% benchmark in common
fund cases. Id.; see also In re Pacific Enterprises Sec. Litig., 47 F.3d 373, 379 (9th Cir.
1995) (33% of common fund as attorneys’ fees was fair and reasonable because of the
complexity of issues and risks of litigation). In Vizcaino I, the district court found that
the case was extremely risky for class counsel to pursue because of negative facts, a lack
of controlling law, and opposing counsel’s vigorous defense of the case. 142 F. Supp. at
1303. The court further found that class counsel’s risk was even greater, and their work
made more difficult, because the defendant (Microsoft) was one of the nation’s largest
and most formidable companies and it, and several law firms, defended the case
vigorously for years on end. Id. Class Counsel here faced many of these same risks,
including, but not limited to, the following substantive litigation risks.
(i) Risk of Not Establishing Claim or Liability
Although the loan documents did not disclose the material facts that the scheduled
monthly payments for up to the first five years of the loan were based on a teaser interest
rate that applied for only one month and that the loans therefore were certain to
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negatively amortize at these payment amounts, the loan documents did disclose the fact
that the scheduled payment amount could be less than the accrued interest and that, if
this occurred, then the difference would be added to the loan’s principal balance (i.e. the
loan would negatively amortize). 12/2/13 Berns Decl., ¶23. Plaintiffs and Class Counsel
steadfastly maintain that the difference between could and will is critical with respect to
incurring indebtedness secured by one’s home. Id. Nevertheless, there has been since the
outset of this litigation, and continues to be, a distinct possibility that a fact-finder or a
reviewing appeals court could determine otherwise that the disclosures and omissions do
not rise to the level of deceptiveness that is required to support violations under the
different prongs of the UCL.
(ii) Risk as to Measure and Amount of UCL Restitution
Another risk throughout this litigation that cannot be dismissed as insubstantial
pertains to the measure of available restitution to Plaintiffs and the Class under the UCL.
As to the UCL claims, Class Members are entitled only to restitution of money or
property “which may have been acquired by means of” Defendants’ unfair competition.
Cal. Bus. & Prof. Code § 17203. Plaintiffs’ restitution theory is that the negative
amortization and interest thereon that they and Class Members paid or incurred, and all
payments they made to avoid negative amortization, constitute money or property that
Defendants may have acquired by means of their unlawful and deceptive lending
practices in concealing the certainty of incurring these costs. 12/2/13 Berns Decl., ¶25.
However, one published state appeals court decision, Boschma v. Home Loan Ctr., Inc.,
198 Cal. App. 4th 230 (2011), has questioned the premise of this theory that negative
amortization on Option ARM loans constitutes a loss of money when it comes about
through purportedly “lower” monthly payments. Id. at 251. Admittedly, Boschma’s
discussion arises in an assessment of common law fraud damages that is dicta inasmuch
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as the court did not dismiss that claim, is not controlling law in any event, and is highly
suspect even on its own terms because it ignores the fact that the purportedly “lower”
monthly payments are the only payment amounts disclosed (while the certainty of
negative amortization caused by these payments is omitted). 12/2/13 Berns Decl., ¶25.
Nonetheless, Plaintiffs and Class Counsel again cannot turn a blind eye to the fact that
this published appellate authority creates some risk that their Class-wide restitution
theory under the UCL still might not be accepted by this Court or an appeals court, and
thus that Class Members may be found not to be entitled to substantial or even any
restitution under the UCL.
The results obtained despite these formidable threats are extremely favorable to
the Class and support the fees and costs sought here.
(iii) Risk of Decertification, an Unfavorable Summary Judgment Ruling and/or Going to Trial
Although Plaintiffs strongly opposed Defendants’ motions for summary judgment,
Plaintiffs faced risks that the Court would accept some or all of the arguments in
Defendants’ motions. Plaintiffs also faced risks that the Court would decertify the Class
based upon Defendants’ arguments and upon the United States Supreme Court’s post-
certification decision in Comcast Corp. v. Behrend, 133 S. Ct. 1426, 185 L. Ed. 2d 515
(2013). Thus, there was a not insubstantial risk that the Court could have decertified the
Class based upon this new case law. This would effectively wipe out any recovery for
the more than 5,000 Class Members who stand to receive significant cash compensation
under the Settlement Agreement, leaving only the named Plaintiffs to pursue their
individual claims.
Additionally, even if Plaintiffs successfully opposed Defendants’ motions, going
to trial in any case is a risk. The records of federal courts are filled with complex cases
such as this one that have gone to trial and ended up being unsuccessful. See, e.g., In re
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Brand Name Prescription Drugs Antitrust Litig., 186 F.3d 781, 785-87 (7th Cir. 1999),
cert. denied, 528 U.S. 1181 (2000) (affirming, in substantial part, a directed verdict
during a trial held after plaintiffs obtained reversal of summary judgments against
defendant prescription drug manufacturers); MCI Commc’ns Corp. v. Am. Tel. & Tel.
Co., 708 F.2d 1081, 1166-69 (7th Cir. 1983), cert. denied, 464 U.S. 891 (1983)
(remanding substantial antitrust judgment for new trial and damages determination);
United States Football League v. National Football League, 644 F. Supp. 1040, 1042
(S.D.N.Y. 1986), aff’d, 842 F.2d 1335, 1377 (2d Cir. 1988), cert. denied, 493 U.S. 1071
(1990) (antitrust trial resulting in liability verdict for plaintiff and award of $1 in
damages subject to trebling).
In sum, in light of the uncertainties of any protracted litigation and the specific
risks pertaining to liability, class certification, and the measure of any available
restitution under the UCL that have been present since the inception of, and throughout,
this litigation, Class Counsel’s undertaking to represent the Class and Subclasses and in
confronting these risks head-on and with great success to date should be considered to
weigh strongly in favor of the proposed attorneys’ fee and cost award.
(e) Contingent Nature of the Fee
The Ninth Circuit has confirmed that a fair fee award must include consideration
of the contingent nature of the fee where there is no assurance of attorneys’ fees or
reimbursement of expenses. See, e.g., Vizcaino II, 290 F.3d at 1049-50 (approving award
of 28% of $96,885,000.00 settlement fund based in part upon finding that “counsel’s
representation of the class-on a contingency basis-extended over eleven years, entailed
hundreds of thousands of dollars of expense, and required counsel to forego significant
other work, resulting in a decline in the firm’s annual income. These burdens are
relevant circumstances.”). Attorneys’ fee awards must be sufficient to encourage skilled
and determined counsel to take on difficult cases and see them through years of litigation
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to a fair and adequate resolution for the plaintiffs. See, e.g., In re Lorazepam &
Chlorazepate Antitrust Litig., Nos. MDL 1290 (TFH), 99MS276 (TFH), Civ. 99-0790
(TFH), 2003 WL 22037741, at *8 (D.D.C. June 16, 2003). As the Ninth Circuit has
recognized:
It is an established practice in the private legal market to reward attorneys
for taking the risk of non-payment by paying them a premium over their
normal hourly rates for winning contingency cases. See Richard Posner,
Economic Analysis of Law § 21.9, at 534-35 (3d ed. 1986). Contingent fees
that may far exceed the market value of the services if rendered on a non-
contingent bass are accepted in the legal profession as a legitimate way of
assuring competent representation for plaintiffs who could not afford to pay
on an hourly basis regardless whether they win or lose.
In re WPPSS, 19 F.3d at 1299.
The commencement of a class action is no guarantee of success. Class Counsel
have received no compensation during the four year course of the litigation and have
incurred nearly four million in attorney and paralegal time and over $200,000.00 in
expenses while litigating for the benefit of the Class and Subclasses. 12/2/13 Berns
Decl., ¶¶27-40. Any fee award or reimbursement of expenses for Class Counsel has
always been a substantial contingency, id., ¶¶22-26, and ultimately any award still is
within the Court’s discretion. Here, despite the many risks faced, Class Counsel
committed their financial and human resources to litigating this case and achieved a
successful result for the substantial benefit of the Class and BSRMC TILA Subclass.
3. A Lodestar Cross-Check Easily Supports the Reasonableness of the Requested Reward.
Even in common fund cases like this one where a percentage-based award is
readily determinable with straight-forward calculations, a lodestar cross-check may help
a court in determining whether a proposed percentage award is reasonable in light of all
circumstances of a case. As the Ninth Circuit has explained, “[c]alculation of the
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lodestar, which measures the lawyers’ investment of time in the litigation, provides a
check on the reasonableness of the percentage award.” Vizcaino II, 290 F.3d at 1050.
Although “the primary basis of the fee award remains the percentage method, the
lodestar may provide a useful perspective on the reasonableness of a given percentage
award.” Id.; see also In re Bluetooth, 654 F.3d at 944 (“[W]e have also encouraged
courts to guard against an unreasonable result by cross-checking their calculations
against a second method.”).
Here, a lodestar cross-check of the requested fee award yields a multiplier of 1.34.
See 12/2/13 Berns Decl., ¶40. Moreover, Class Counsel are continuing, and will
continue, to dedicate significant time to the case throughout the final approval and
administration process. In the Ninth Circuit and elsewhere, courts regularly approve
percentage-based awards where the lodestar cross-check yields a multiplier of three (3.0)
or far more. See, e.g., Vizcaino I, 142 F. Supp. 2d at 1305-06 (approving 3.67 lodestar
multiplier for percentage-based fee award); Craft v. Cnty. of San Bernardino, 624 F.
Supp. 2d 1113, 1125 (C.D. Cal. 2008) (approving an award that “will result in a
multiplier of approximately 5.2”); see generally Wershba, supra, 91 Cal. App. 4th at 255
(“Multipliers can range from 2 to 4, or even higher.”); Vizcaino II, 290 F.3d at 1052
Appendix (compiling 34 common fund cases with percentage-based fee awards and
funds ranging from $50,000,000.00 to $200,000,000.00 where lodestar cross-check
resulted in multiplier of 2.0 or more in half of the cases and 3.0 or more in a fourth of the
cases). Thus, the multiplier here easily supports the requested fee award.
Here, an award of $5,490,000.00 representing 30% of the common fund, inclusive
of costs, and a lodestar multiplier of 1.34 based on hours of work performed to date, is
more than reasonable under either of these measures for determining fee and cost awards
in class action litigation. The fact that the final lodestar multiplier will be even lower
after Class Counsel perform all of the necessary additional work to secure final approval
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and implementation of the Settlement Agreement only further underscores the
reasonableness of the proposed award. 12/2/13 Berns Decl., ¶41. See generally Hanlon,
150 F.3d at 1029 (affirming fee award where class counsel “must remain available to
enforce the contractual elements of the settlement agreement and represent any class
members who encounter difficulties”).
For all of the reasons set forth, whether measured as a percentage of the common
fund under the Settlement Agreement or on a lodestar basis, the proposed attorneys’ fee
and cost award of $5,490,000.00 to Class Counsel falls well within the bounds of
fairness and reasonableness recognized by the Ninth Circuit, this Court, and others
across the country, and therefore should be approved.
4. Plaintiffs’ Counsel Should Be Awarded Costs.
Class Counsel’s application for a fee and expense award of 30% of the Settlement
Fund includes reimbursement of $204,353.03 in expenses incurred in connection with
the prosecution of this litigation.4 The expenses incurred are itemized in Exhibits B, D,
E, F, H, and I to the 12/2/13 Berns Declaration, and were primarily incurred for expert
witnesses and deposition transcripts. Defendants have agreed to reimburse these
expenses as long as the total amount of fees and costs did not exceed 30% of the
Settlement Fund.
Class Counsel is typically entitled to reimbursement of all reasonable out-of-
pocket expenses and costs in prosecution of the claims and in obtaining a settlement. See
Vincent v. Hughes Air West, 557 F.2d 759, 769 (9th Cir. 1977). In Serrano v. Priest, for
example, the California Supreme Court advised that reimbursement of costs in a
common fund is “grounded in ‘the historic power of equity to permit the trustee of a
fund or property, or a party preserving or recovering a fund for the benefit of others in
4 This amount does not include expenses that have yet to be incurred, including expenses for attending
the Final Approval Hearing, which are estimated to exceed $1,000.
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addition to himself, to recover his costs, including his attorneys’ fees, from the fund or
property’.” 20 Cal. 3d 25, 35 (1977), citing Alyeska Pipeline Co. v. Wilderness Society,
421 U.S. 240, 257 (1995). All of the costs for which Class Counsel is seeking
reimbursement were actually incurred. 12/2/13 Berns Decl., ¶¶27-40.
B. The Court Should Approve the Proposed Incentive Payments to Plaintiffs.
Courts often approve awards to class representatives for their service to the class
as part of their approval of settlements in class actions. See, e.g., In re Mego Fin. Corp.
Sec. Litig., 213 F.3d 454, 463 (9th Cir. 2000) (“Finally, the district court did not abuse
its discretion . . . in awarding an incentive award to the Class Representatives.”); In re
Lorazepam & Chlorazepate Antitrust Litig., 205 F.R.D. 369, 400 (D.D.C. 2002)
(“Incentive awards are not uncommon in class action litigation and particularly where a
common fund has been created for the benefit of the entire class. In fact, courts routinely
approve incentive awards to compensate named plaintiffs for the services they provided
and the risks they incurred during the course of the class action litigation.”); id.
(approving plaintiff awards representing 0.3% of classes’ recoveries); Hughes v.
Microsoft Corp., Nos. C98-1646C, C93-0179C, 2001 WL 34089697, at *12 (W.D.
Wash. Mar. 26, 2001) (“Incentive awards compensate named plaintiffs for the services
they provided and the risks they incurred during the course of the class action
litigation.”).
Plaintiffs and Class Counsel are requesting that the Court approve compensation
from the $18,300,000.00 Settlement Fund in the amount of $5,000.00 for each Plaintiff
based on his or her contributions to the litigation. See Settlement Agreement, § 3.5.
Plaintiffs have worked with Class Counsel, as the representatives of the Class and
BSRMC TILA Subclass, for over four years, not including the work they performed as
plaintiffs in the prior action filed on August 28, 2007, case number CV-07-3454. During
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this litigation, they have responded to Class Counsel’s requests for information,
responded to Defendants’ two sets of written discovery, reviewed relevant court filings,
provided documents in response to Defendants’ discovery requests, and have each been
deposed by Defendants’ counsel. See 12/2/13 Berns Decl., Exhibits J and K (Declaration
of Joseph A. Monaco and Declaration of James Brandt).
In light of the valuable services Plaintiffs have performed for the Class and
BSRMC TILA Subclass in helping to bring about the substantial benefits of the
Settlement Agreement, the proposed $5,000.00 incentive payments, which combined
represent less than 0.1% of the total Settlement Fund, fall well within the range of such
awards that courts in the Ninth Circuit and elsewhere have approved as fair and
reasonable. See, e.g., In re TFT-LCD (Flat Panel) Antitrust Litig., No. M 07-1827 SI,
2013 WL 1365900, at *17 (N.D. Cal. April 3, 2013) (approving incentive awards of
$15,000 for each of the 40 court-appointed class representatives); In re Mego, 213 F.3d
at 457 (affirming awards of $5,000 to each of two named plaintiffs from $1,725,000
settlement fund); In re Wachovia Corp. “Pick-a-Payment” Mortg. Mktg. and Sales
Pract’s Litig., No. 5:09-md-02015-JF, 2011 WL 1877630, at *7 (N.D. Cal. May 17,
2011) (approving awards ranging from $2,500 to $14,250 and totaling $125,000 to
named plaintiffs); In re Lorazepam & Chlorazepate Antitrust Litig., 205 F.R.D. at 400
(approving plaintiff awards representing 0.3% of classes’ total recoveries); Presley v.
Carter Hawley Hale Profit Sharing Plan, No. C9704316SC, 2000 WL 16437, at *2
(N.D. Cal. Jan. 7, 2000) (approving $25,000 incentive awards); Van Vranken v. Atlantic
Richfield Co., 901 F. Supp. 294, 300 (N.D. Cal. 1995) (approving $50,000 award to
named plaintiff); Gibson & Co. Ins. Brokers, Inc. v. Jackson Nat. Life Ins. Co., No.
CV06- 5342 DSF (SHX), 2008 WL 618893 (C.D. Cal. Feb. 27, 2008) (awarding $5,000
incentive fee). See also Theodore Eisenberg & Geoffrey P. Miller, Incentive Awards to
Class Action Plaintiffs: An Empirical Study, 53 UCLA L. Rev. 1303, 1333 (2006) (an
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empirical study of incentive awards to class action plaintiffs has determined that the
average aggregate incentive award within a consumer class action case is $29,055.20,
and that the average individual award is $6,358.80.).
In light of the benefits conferred by the Settlement Agreement reached in this
action, the role of Plaintiffs in this lawsuit should be recognized with reasonable
payments to compensate them for the time and expense they devoted through their active
participation in this litigation.
IV. CONCLUSION
For all of the reasons set forth herein, Plaintiffs and Class Counsel respectfully
request that the Court approve the proposed award of attorneys’ fees and costs of
$5,490,000.00 to Class Counsel and the proposed incentive payments of $5,000.00 to
each of the Plaintiffs.
Dated: December 2, 2013 Respectfully submitted,
BERNS WEISS LLP
By: /s/ Jeffrey K. Berns
Jeffrey K. Berns
20700 Ventura Blvd., Suite 140
Woodland Hills, CA 91364
Tel.: (818) 961-2000
Fax: (818) 999-1500
– and –
Lee A. Weiss (admitted pro hac vice)
585 Stewart Avenue, Suite L-20
Garden City, New York 11530
Tel.: (516) 222-2900
Fax: (818) 999-1500
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MOORE & LEVIANT LLP J. Mark Moore (SBN 180473)
20700 Ventura Blvd., Suite 140
Woodland Hills, CA 91364
Tel.: (877) 360-7020
Fax: (310) 870-7020
WILLIAMS CUKER BEREZOFSKY Mark R. Cuker (admitted pro hac vice)
Michael J. Quirk (admitted pro hac vice)
1515 Market Street, Suite 1300
Philadelphia, PA 19103-1819
Tel.: (215) 557-0099
Fax: (215) 557-0673
ARBOGAST BOWEN LLP
David M. Arbogast
Chumahan B. Bowen
11400 W. Olympic Blvd., 2nd Floor
Los Angeles, CA 90064
Tel.: (310) 477-7200
Fax: (310) 943-2309
Attorneys for Plaintiffs, the Certified Class,
and the Certified BSRMC and TILA
Subclasses
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