The opinion of the court was delivered by: Crowley, District Judge.
MEMORANDUM OPINION AND ORDER
Plaintiffs, security holders of Cenco, Inc., brought these
class actions to enforce rights created under federal securities
regulations and common law charging that from 1970 to 1975 Cenco
and several of its employees, along with other individuals,
manipulated inventory and altered sales figures as part of a
common plan to falsify Cenco's financial position. Seidman &
Seidman, Cenco's auditors, has agreed to settle with the class
for $3.5 million. The joint application for fees and costs before
the court at this time has been submitted in conjunction with
The application has been filed on behalf of Sachnoff, Schrager,
Jones, Weaver & Rubenstein, Ltd. (Sachnoff); Drinker, Biddle &
Reath (Drinker); Kass, Goodkind, Wechsler & Labaton (Kass); and
Booth, Lipton & Lipton (Booth). It covers the period from
February 1, 1979 through June 15, 1980.*fn2 Sachnoff, which
handled approximately 75% of the work covered in the application,
requests a lodestar fee of $223,362.50 in fees, and $24,783.32 in
expenses. Drinker seeks a lodestar fee of $55,934.50 and
$6,037.65 in expenses; Kass seeks a lodestar fee of $25,675.00
and $1,936.10 in expenses; and Booth seeks a lodestar fee of
$63,007.50 and $4,916.82 in expenses. Sachnoff, Booth and Drinker
seek reimbursement for paralegals, Sachnoff asking for
$41,300.00, Booth asking for $1,802.50, Drinker asking $1,168, no
firm requests a multiple for paralegal services.
In evaluating the reasonableness of this current petition the
court recognizes that it has wide discretion to award attorneys'
fees in class actions, Ellis v. Flying Tiger Corp., 504 F.2d 1004
(7th Cir. 1972) and that this discretion is appropriately
exercised whenever the efforts of counsel confer a substantial
economic benefit on the class. Mills v. Electric Auto-Lite Co.,
396 U.S. 375, 90 S.Ct. 616, 24 L.Ed.2d 593 (1970). The factors
the court must consider in determining the appropriateness of the
fees are: 1) the contingent nature of the class action; 2) the
quality of legal services rendered; 3) the benefits derived by
the class; and 4) the public service aspect of the litigation. In
re Folding Cartons Antitrust Litigation, 84 F.R.D. 245 (N.D.Ill.
1979). No one factor is decisive, Freeman v. Ryan, 408 F.2d 1204
(D.C.C. 1968); all factors must be carefully weighed against the
background of the many varied and complicated factors of the
particular litigation, Simler v. Conner, 228 F. Supp. 127
The starting point is computation of the actual time devoted to
the litigation. National Treasury Employees Union v. Nixon,
521 F.2d 317 (D.C.Cir. 1975). In ascertaining the reasonableness of
the hours expended at any stage in the litigation, the trial
judge must draw upon his own knowledge, experience and expertise
regarding similar litigation. Whether there has been duplication
of effort and delegation of routine work to paralegals who
command a lesser hourly rate are also relevant factors in
determining whether the time billed is reasonable. Johnson v.
Georgia Highway Express, Inc., 488 F.2d 714 (5th Cir. 1974).
The docket sheet alone demonstrates that extensive work was
completed during the time period covered in the application. As
lead counsel points out, this phase of the litigation represents
only 25% of the time period since this case was filed but
consumes 40% of the civil docket. Moreover, even a quick perusal
of the record reveals that the work accomplished was often time
consuming, tedious and complex, requiring the taking of extensive
depositions, re-examining of thousands of documents, the
preparing of numerous trial witnesses and the drafting of
discovery motions. Additionally the entire case was readied for
trial, the firms of Sachnoff, Drinker and Booth each preparing
different aspects of the case. Moreover the court does not rely
solely on the docket sheet. The court is well aware, from first
hand observation, the amount of time and effort expended.
This litigation involves one of the major corporate frauds in
recent years. As this litigation progressed, counsel examined
many thousands of documents, researched novel aspects of
accountant liability, contribution and indemnification law and
the calculation of the measure of damages. Counsel also developed
unique methods of proof and of presenting damage calculations to
the jury. Affidavits submitted in support of the joint fee
application amply support counsel's contention that at all times
during the preparation of the case, duplicative efforts were
avoided and pains were taken to keep the expenses at a minimum.
The number of hours billed, when compared with the complexity of
the litigation, leaves no doubt that the number of hours in the
application is more than reasonable.
The next consideration is whether the hourly rates sought are
fair. The rates requested range from $150 to $45 per hour for
attorneys and $35 per hour for paralegals. Lead counsel requests
$150 for his time. All the other partners in the four firms
request up to $125 per hour. The billing rate requested for
associates ranges from $100 to $45. Moreover, base rates similar
to these have already been approved by this court for work done
in this case.
Once the total number of hours and the hourly rate are
calculated, these two numbers are multiplied to arrive at the
lodestar rate, which constitutes the market value of counsel's
services, Merola v. Atlantic Richfield Co., 493 F.2d 292 (3rd
Cir. 1974), it is then necessary to consider if the lodestar rate
should be increased. The lodestar rate may properly be increased
for several reasons. It may, for example, be increased if the
litigation is legally and factually complex. Other factors which
warrant an increase in the lodestar are the risks assumed in
developing the case and the delay in the receipt of payment for
services rendered. Lindy Brothers Builders, Inc. v. American
Radiator & Standard Sanitary Corp., 487 F.2d 161 (3rd Cir. 1973).
Arenson v. Board of Trade, 372 F. Supp. 1349 (N.D.Ill. 1974).
Applying these factors to this case, it is clear from the
magnitude and complexity of the litigation that the lodestar fee
should be increased. First, although an extremely favorable
settlement was finally reached between the class and Seidman,
this settlement could not have been achieved if plaintiffs'
counsel had not thoroughly and painstakingly prepared for trial.
In opting for the settlement, counsel had to weigh the
substantial potential barriers to ultimate recovery had the jury
returned a favorable verdict as well as analyze novel and
uncertain issues in the three major areas of law, as they relate
liability, contribution, the theory of damages.
Secondly, the contingent nature of the litigation also weighs
heavily in favor of increasing the lodestar route, for there were
inherent uncertainties in pursuing the class claim against
Seidman. The evidence that Seidman had knowledge of the fraud was
inconclusive and it was not apparent that plaintiffs could win if
they had gone to trial. The uncertainty as to the likelihood of
success at trial made it unlikely that a settlement would be
reached. Thus, the contingency factor here was very high and for
this reason, dictates that plaintiffs' counsel deserves
significantly greater compensation than they would have absent
the high risk factors. Lindy Bros. Builders, Inc. v. American
Radiator & Standard Sanitary Corp., 487 F.2d 161 (3rd Cir. 1973).
The delay in receipt of payment is also a relevant factor in
computing a reasonable fee award. Counsel have worked for a very
substantial period without payment in these highly inflationary
times. In addition, substantial sums have been advanced for
expenses. These factors militate in favor of increasing the
The final factor to be considered is the benefit to the class
and to the public. Since recovery in this case totals $19.25
million and is one of the largest ever obtained in a security
fraud class action in this district, there can be no question
about the benefit to the class. The public has also benefitted
from this litigation for it helps insure that state and federal
regulations are enforced and provides incentives for private
actions in the future.
For its part in this stage of the litigation, Sachnoff requests
that a multiple be applied to its lodestar rate, higher than the
other three firms. The difference in requested multiples
correctly reflects that Sachnoff has assumed the major
responsibility for this case and has been primarily responsible
for coordinating efforts and all major decisions. The court has
had numerous opportunities to evaluate the quality of work done
by all the attorneys from this firm who have been involved with
the case. These services have been of a consistently high
calibre. An analysis of the fees requests demonstrates that
partners did not perform work which could be done by associates.
Paralegals were substantially used at great benefit to the class.
In sum, the hours expended were very lean, considering the
responsibility involved and the results obtained. Accordingly,
the lodestar rate and expenses sought are ...