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March 6, 1992

SARAH HARMAN, et al., Plaintiffs,
LYPHOMED, INC., et al., Defendants.

The opinion of the court was delivered by: WILLIAM T. HART

 This securities fraud class action settled in 1988 and 1989. The settlement was $ 9,900,000. The settlement fund has been held in an escrow account and also includes interest that has been accumulating since December 1989. The settlement, which was approved by the court, provides that the attorneys for the class could request attorneys fees to be paid from the fund, but that the amount requested, not including expenses, could not exceed 30% of the $ 9,900,000 settlement.

 Counsel timely moved for attorneys fees, requesting a lodestar of $ 1,489,526 which, combined with a multiplier of 2.012, results in an award equal to 30% of the settlement fund. Counsel also suggested that a percentage of the fund or a blended percentage of the fund/lodestar method could be used to produce a 30% award. The lodestar method was used. Based on a sampling of the fees requested, it was found that only 52.6% of the fees claimed should be awarded which is $ 783,491. See Harman v. Lyphomed, Inc., 734 F. Supp. 294, 298 (N.D. Ill. 1990) ("Harman I "). As a check on this amount, the court also considered the allocation of work between partners, associates, and paralegals. Using this method, and adjusting the rates charged, it was estimated that $ 953,750 would be reasonable. See id. at 298. Relying on the two figures, it was determined that $ 950,000 was a reasonable lodestar. Id. It was also determined that counsel was not entitled to a multiplier, id., and that the percentage method would not be used. Id. at 299. Counsel timely moved for reconsideration, raising a number of arguments. The court determined that, instead of reducing the rates as had originally been done, the rates claimed would be used in making a projection under the partner/associate ratio approach. On reconsideration, the fee award was increased to $ 1,050,000. See id. at 301.

 The Seventh Circuit vacated this court's award. See Harman v. Lyphomed, Inc., 945 F.2d 969 (7th Cir. 1991) ("Harman II "). The Seventh Circuit upheld the sampling method employed, but held that application of the partner/associate ratio as a guide was not adequately supported. Id. at 975. While indicating that a percentage method would have been permissible, the court held that it was not mandatory and that the lodestar/multiplier approach was permissible. Id. at 973-75. The court also held that the question of applying a multiplier had not been adequately considered and required further development on remand. Id. at 976.

 Following the remand, this court appointed a special master to recommend the fee to be awarded. Counsel declined to submit additional documentation of the lodestar to the master. Instead, counsel argued the proper lodestar is the $ 1,489,526 originally requested. Counsel also offered to accept a "compromise" amount of $ 1,250,000. Counsel suggested a multiplier of approximately 2. Primarily, however, counsel argued that the percentage method should be employed and that an appropriate percentage would be 27.5% of the settlement amount.

 The master recommended that the court apply a percentage method based on the point in the litigation at which the case was terminated. Given that this case was settled before the completion of discovery, the magistrate recommended that the figure of 20% be used. Alternatively, if the lodestar/multiplier method were to be used, the master recommended using the $ 783,491 figure and a multiplier of 2. Counsel requested reconsideration from the master who declined to revise the 20% recommendation. The master, however, changed his report to assume the lodestar was $ 1,050,000 instead of $ 783,491. A copy of the master's revised report is attached hereto as Appendix A.

 Counsel have filed objections to the master's report. Counsel do not dispute the percentage approach taken by the master, but argue that the case was further developed than the master considered it to be. Counsel argue their award should be 25%. If the lodestar/multiplier method is to be used, counsel again suggests a lodestar of $ 1,489,526 or the compromise figure of $ 1,250,000. The requested multiplier is 2.

 Initially, it is noted that this is not a question of negotiation between the court or master and class counsel. Class counsel should not suggest "compromise" amounts. Had someone been appointed to represent the class against counsel on the fee issue, then negotiation and compromise with such a representative would be possible. That, however, is not the role of the court or the master, both of whom are neutral decisionmakers seeking to determine a fair, just, and appropriate fee. Thus, both the court and the master have sought to determine an appropriate fee; class counsel are not viewed as opponents to whom a low amount might be offered with the ultimate goal of achieving a compromise at a higher figure.

 The first question to consider is whether to apply a percentage method or the lodestar/multiplier. As was discussed in Harman I, 734 F. Supp. at 299, both methods have their advantages and disadvantages. On appeal, the Seventh Circuit approved continued use of the lodestar method. Harman II, 945 F.2d at 974. Implicit in this discussion, however, is a recognition that the district court also has the discretion to employ the percentage method. The master's discussion of an appropriate percentage methodology to use is thoughtful and thorough. While recognizing that there may also be other methods for determining an appropriate percentage, the methodology employed by the master is found to be acceptable and his conclusion of a 20% award is found to be consistent with the facts before the court. The master's conclusion and recommendation as to a percentage award is adopted by the court and the master's January 31, 1992 report is appended to this order. Counsel will be awarded fees equal to 20% of the settlement amount plus accumulated interest on that amount. As recommended by the master without objection, counsel will also be reimbursed for $ 131,900 of costs plus the accumulated interest.

 In reaching his conclusion, the master first considered that the settlement reached was neither extraordinarily high nor extraordinarily low and therefore no adjustment was necessary based on the amount of the settlement. Therefore, under the methodology set forth in the master's report appended hereto, an appropriate award would be between 15% and 30% depending on the point in litigation at which the case concluded. This case was settled early enough in the proceedings to justify only an award of 20%, not the 25% that counsel now argue they are entitled to receive.

 Besides their argument as to how far the case proceeded prior to settlement which the court rejects, counsel point to other cases in arguing that the 20% award is low. The data provided by counsel is either inaccurate or not verifiable. Counsel refer to four recent class action cases from this district in which they claim the fee awards equalled 25% to 30% of the settlements. It is unclear if counsel contend the fee awards were expressly made as a percentage of the settlement or if they are simply reporting what the awards were as a percentage. The only one of the four cases cited that could be found on the computer database checked was In re VMS Ltd. Partnership Securities Litigation, 1991 WL 134262 (N.D. Ill. July 16, 1991) (Zagel, J.). This order does not set forth how the amount of fees was determined.

 The court's research of recent reported class action securities fraud cases from this district reveals five cases awarding fees, all of which applied the lodestar/multiplier method. None of these cases were cited to the court by counsel, although all but Rudolph involved a number of the attorneys who also represent the Harman class. As a percentage of the settlement (or in one case damages) obtained in these cases, the fee awards represented approximately 10% to 22%. See In re Telesphere International Securities Litigation, 753 F. Supp. 716 (N.D. Ill. 1990) (Shadur, J.); *fn1" In re Continental Illinois Securities Litigation, 750 F. Supp. 868 (N.D. Ill. 1990) (Grady, J.); *fn2" In re Security America Corporation Securities Litigation, 750 F. Supp. 352 (N.D. Ill. 1990) (Alesia, J.); *fn3" Rudolph v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 1990 WL 7168 (N.D. Ill. Jan. 18, 1990) (Williams, J.); *fn4" In re Gould Securities Litigation, 727 F. Supp. 1201 (N.D. Ill. 1989) (Aspen, J.). *fn5"

 Counsel also provide a "Table of Percentage Fee Award Cases" with the Class Action Reports article cited as the purported source. Counsel list 43 cases with all but three awarding 25% or more and none awarding less than 22.5%. It is not clear where in the article this information is obtained from. The first case counsel list is In re Ampicillin which they report as a 45% award. Class Action at 482, though, reports that fees and costs awarded in Ampicillin were 10.7% of the initial settlement and 45% of the additional settlement which comes to a fee and costs award of 25.5% of the total settlement. *fn6" There is no indication in Class Action that the fees were computed on a percentage basis. In any event, Class Action at 555 provides a table of the 39 covered cases that it treats as percentage award cases. *fn7" All are securities class actions except one case which is an antitrust class action. Adding together all the recoveries and all the fee awards, *fn8" the fees awarded are 11.2% of the recoveries. This figure, however, is distorted by the Standard Oil case which represents about 55% of the recoveries, but only awarded fees of 3.2%. Eliminating the Standard Oil case from the table totals, the fees awarded are 21.0% of the recoveries. The median award for the 39 cases on the table is 25.9%. The median may be the more appropriate number to consider given the wide range of recoveries included in the table. *fn9" Eleven of the cases had recoveries between 5 and 15 million dollars *fn10" which is a range within which the Harman settlement falls. The percentage fee award for these cases ranged from 15.8% to 32.0%, with a median of 25% and total fees awarded being 24.4% of total recoveries. According to the analysis of Class Action at 554, percentage awards resulted in attorneys obtaining hourly rates 64% higher than if the lodestar/multiplier method had been applied. *fn11"

 The Northern District of Illinois and Class Action data discussed show that counsel's contention that the 25% they seek is a low percentage compared to other cases is not true. The data instead shows that 25% is in the middle of the scale, not at the bottom end. Awards of 15 to 30 per cent are not unusual. The data also indicates that 25% is a high amount compared to cases employing the lodestar method. As previously stated in Harman I, 734 F. Supp. at 299-300, and in accordance with the master's methodology, this is a case in which the percentage should be below the average, not at the middle or high end of the scale. Twenty per cent is an appropriate percentage to employ.

 In Harman II, 945 F.2d at 974, the Seventh Circuit suggested that the award resulting from applying the multiplier/lodestar can be checked against the amount that figure represents as a percentage. It would also be appropriate to check a percentage award against the lodestar amount. As a practical matter, that is not a check that ordinarily would be performed given the amount of work required to determine a lodestar. Given the posture of the present case, though, determining a lodestar will not be a difficult task, the papers having previously been presented and analyzed.

 Since only being done as a check, it is not essential to do a precise computation. The master's assumption of a $ 1,050,000 lodestar and a multiplier of two, though, is not what this court would conclude to be an appropriate lodestar.

 Class counsel has been given ample opportunity to prove it is entitled to a lodestar of $ 1,050,000, $ 1,250,000, or even more. Initially, the submission of counsel was rejected as not adequately organized and as containing insufficient specificity. See Harman I, 734 F. Supp. at 296. The revised request was still deficient, but the court used what was available to make its own computations. See id. at 296-97. On reconsideration, counsel complained they were not given an adequate opportunity to provide additional documentation, but did not provide any additional documentation and had only minor objections to the court's computations. See id. at 300-01 & n.3. After the remand, the master again gave counsel an opportunity to submit additional documentation or make specific arguments regarding an appropriate lodestar. Counsel declined the opportunity to submit anything additional or to make any substantial argument.

 Given that counsel declined to submit any additional documentation or argument regarding an appropriate lodestar, the master initially assumed that the lodestar computed by the sampling method was accurate. Citing Harman I, 734 F. Supp. at 301, counsel argued on reconsideration that the figure determined by the sampling method was only a guide and that the master should assume the final figure of $ 1,050,000 was correct. The master accepted this argument and modified his report.

 In determining both the initial figure of $ 950,000 and the final figure of $ 1,050,000, this court used both the sampling method and the partner/associate ratio as guides. Before the Seventh Circuit, counsel successfully argued that the court should not have considered the partner/associate ratio and that was one basis for the remand. Therefore, the $ 1,050,000 lodestar figure would have to be reconsidered, but only in light of the limited lodestar argument presently pursued by counsel.

 The Seventh Circuit approved the sampling methodology. See Harman II, 945 F.2d at 975. Accord Evans v. City of Evanston, 941 F.2d 473, 476-77 (7th Cir. 1991). Taking into account that some additional documentation was presented on reconsideration, see Harman I, 734 F. Supp. at 301, the sampling method is found to produce a rounded off figure *fn12" of 55% of the claimed fees being allowed. Fifty-five per cent of the $ 1,489,526 claimed is $ 819,239 which can be rounded to $ 820,000. No adequate reason being presented for determining a lodestar higher than the amount shown by the sampling methodology, this amount will be used as the lodestar.

 The next question is whether a multiplier should be awarded. While leaving this issue to be resolved by this court if necessary, the Seventh Circuit indicated that there was "some probability" that a multiplier would be appropriate. Harman II, 945 F.2d at 976. The Seventh Circuit held that risk, viewed as of the time the case was first taken by the attorneys, is the only factor to consider. *fn13" Id. See also Skelton v. General Motors Corp., 860 F.2d 250, 255 (7th Cir. 1988), cert. denied, 493 U.S. 810, 107 L. Ed. 2d 22, 110 S. Ct. 53 (1989); Littlefield v. McGuffey, 954 F.2d 1337, slip op. at 25-26 (7th Cir. 1992).

 In Pennsylvania v. Delaware Valley Citizens' Council for Clean Air, 483 U.S. 711, 733, 97 L. Ed. 2d 585, 107 S. Ct. 3078 (1987) (O'Connor, J., concurring), *fn14" the Supreme Court held that risk does not form a sufficient basis for awarding a multiplier unless the prevailing party would have had difficulty finding counsel in the relevant market. Accord Soto v. Adams Elevator Equipment Co., 941 F.2d 543, 553 (7th Cir. 1991). Justice O'Connor also indicated that the risks peculiar to the case generally are not to be considered; instead the focus should be on how the relevant market compensates for risk. Delaware Valley, 483 U.S. at 734. See also Bauman v. Jacobs Suchard, Inc., 1991 WL 125952 (N.D. Ill. June 27, 1991). In Skelton, 860 F.2d at 255-57, the Seventh Circuit applied the Delaware Valley principles to a common fund case resulting from settlement of a case that included claims that had statutory fee provisions.

 In the present case, this court found that the large number of attorneys that were willing to take on this case from its beginnings indicated that this was not a case in which a multiplier was necessary to attract counsel. See Harman I, 734 F. Supp. at 298. Cf. In re Continental Illinois Securities Litigation, 750 F. Supp. 868, 895 (N.D. Ill. 1990). Also, prior to the filing of any of the suits, the Food and Drug Administration had already ordered that certain corrective actions be taken that were part of the injunctive relief sought by the plaintiffs in the various lawsuits. This was not a case which, on the particular facts of the case viewed from the beginning of the dispute, involved substantial risk. It did, however, involve some risk. Therefore, looking only to the particular facts of this case, it is found that there was risk involved and therefore application of some level of multiplier would be appropriate.

 The law is unsettled as to how the particular facts of the pending case should be considered in analyzing the risk involved. The Seventh Circuit has not expressly addressed the issue which is clearly raised by Justice O'Connor's concurrence. The Seventh Circuit, without discussion, has continued to uphold rulings on multipliers based solely on the particular facts of the case. See, e.g., Littlefield, slip op. at 25. The Third Circuit appears to hold that only facts about the relevant market can be considered and not the facts of the particular case. See Blum v. Witco Chemical Corp., 888 F.2d 975, 981 (3d Cir. 1989). The District of Columbia Circuit had also so held, see McKenzie v. Kennickell, 277 App. D.C. 297, 875 F.2d 330, 334 (D.C. Cir. 1989), but recently overruled that case, instead holding that Justice O'Connor's concurrence cannot be relied on as expressing the views of the Supreme Court in Delaware Valley and that multipliers are never allowed in statutory fee cases. See King v. Palmer, 292 App. D.C. 362, 950 F.2d 771 (D.C. Cir. 1991) (en banc). In a recent decision, the Eighth Circuit held that the prevailing plaintiff was not required to prove that she had actually faced difficulty in obtaining counsel, but still went on to discuss that she had successfully made such a showing and this still appeared to be relevant to the determination to award a multiplier. See Morris v. American National Can Corp., 952 F.2d 200, 205-06 (8th Cir. 1991).

 This court is bound to follow the Seventh Circuit which, unlike the District of Columbia Circuit, continues to hold that Justice O'Connor's concurrence is to be considered the Supreme Court's holding in Delaware Valley. The Seventh Circuit also continues to consider the particular risks of the individual case. These two Seventh Circuit holdings, however, can be reconciled. Justice O'Connor specifically stated that the applicant for fees must "establish that without an adjustment for risk the prevailing party 'would have faced substantial difficulties in finding counsel in the local or other relevant market.'" Delaware Valley, 483 U.S. at 733 (O'Connor, J., concurring) (quoting Justice White's plurality at 731). This seems to refer to the consideration of the particular facts of the case before the court. Justice O'Connor also stated: "Finally, a court should not award any enhancement based on 'legal' risks peculiar to the case." Delaware Valley, 483 U.S. at 734 (O'Connor, J., concurring). This appears to exclude consideration of individual facts. The two statements, though, can be reconciled in light of Justice O'Connor's discussion of the market setting the appropriate rate of compensation. See id. at 733. In light of Seventh Circuit precedent and Delaware Valley, it is held that the individual facts are to be considered in determining if plaintiffs faced a risk that justifies awarding a multiplier, but that cases in general are to be considered in determining the amount of the multiplier.

 As previously discussed, this case involved some risk and therefore the award of a multiplier is appropriate. This court recently held that, without regard to the particular facts of a case, the appropriate multiplier for complex federal litigation in this district is 1.75. See Bauman, 1991 WL 125952. Therefore, a multiplier of 1.75 would be permitted. If only the particular facts of the case were to be considered, however, the multiplier would be more in the area of 1.25.

 Under the lodestar/multiplier approach, fees in the amount of $ 1,435,000 (1.75 times $ 820,000) would be awarded. This is 14.5% of the settlement amount. If a multiplier of only 1.25 were used, the award would be $ 1,025,000 which is 10.4% of the settlement amount. Even the master's suggestion of $ 2,100,000 as a lodestar/multiplier award is still only 21.2% of the settlement amount. Counsel's suggested "compromise" amount, which is still an overstated amount, and a lodestar of 1.75 or 1.25, produces a result of $ 2,187,500 (22.1%) or $ 1,562,500 (15.8%). Using a multiplier of 2 and the compromise amount would produce an award of $ 2,500,000 which is 25.3%. Both those numbers, however, are higher than what a proper lodestar/multiplier should be. If anything, consideration of the lodestar/multiplier amount indicates the award should be less than 20%, not more than 20%. The 20% figure, however, is still found to be within a reasonable range for a percentage.

 The court adopts the master's recommendation of awarding fees equal to 20% of the settlement amount and expenses of $ 131,900.

 IT IS THEREFORE ORDERED that the Clerk of the Court is directed to enter judgment awarding plaintiffs' counsel $ 2,129,900 representing $ 1,998,000 in attorneys fees and $ 131,900 expenses payable out of the class settlement fund, plus interest accrued from December 22, 1989 to the date of disbursement from the settlement fund escrow account.


 William T. ...

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