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SPICER v. CHICAGO BD. OPTIONS EXCH.

August 9, 1993

MYLES M. SPICER, et al., Plaintiffs,
v.
CHICAGO BOARD OPTIONS EXCHANGE, INC., et al., Defendants.



The opinion of the court was delivered by: HUBERT L. WILL

 Before us now in this case are all remaining matters: the distribution to the class of the settlement fund, the fee petitions from class counsel, class counsel's requests for reimbursement of expenses, and the incentive awards requested for the representative plaintiffs. When a common fund is created for the settlement of a class action lawsuit, as in this litigation, the distribution of the fund is controlled by the court, acting as fiduciary for the class members. Skelton v. General Motors Corp., 860 F.2d 250, 252-53 (7th Cir. 1988), cert. denied, 493 U.S. 810, 107 L. Ed. 2d 22, 110 S. Ct. 53 (1989). The voluminous fee and costs requests submitted by class counsel -- from six law firms and representing the work of approximately 40 lawyers, 17 law clerks, 25 paralegals, and others, over the course of more than four years -- will be considered first, under the common fund doctrine, which allows us to award fair and reasonable attorneys' fees and reimbursement for expenses reasonably incurred in creating the settlement fund.

 We have already granted to class counsel two interim awards of attorneys' fees and expenses in the amounts of $ 750,000.00 and $ 1,000,000.00, totalling $ 1,750,000.00. Class counsel have filed a fee petition requesting $ 4,396,324.00, which represents 81.7% of their calculated lodestar figure of $ 5,379,089.00. In addition, class counsel have requested reimbursement for case expenses totalling $ 1,197,553.77. The initial requests for fees and expenses together total almost 56% of the $ 10,000,000 settlement. Class counsel have also filed a petition for administrative expenses and fees. Finally, class counsel have filed a supplemental petition for administrative fees and expenses. In the original petition, they requested $ 232,135.50 in legal fees already incurred, plus an estimated $ 5,000.00 for remaining legal fees to complete the administration, and $ 44,746.79 in costs already incurred in administering the claim fund, plus an estimated $ 1,550.00 for remaining out-of-pocket costs to complete the administration. In their supplemental petition for administrative expenses and fees, however, class counsel request additional costs of $ 3,499.00, future projected administrative costs of $ 1,573.00, and additional legal fees of $ 28,800.00. We assume that the supplemental petition for fees replaces the original request of an estimated additional $ 5,000.00, to complete the administration of the fund. We further assume that the supplemental petition for costs replaces the original request for an estimated additional $ 1,550.00, to complete the fund administration.

 In sum, the total amount of fees requested by class counsel is $ 4,657,259.50, including the fees requested in the original and supplemental petitions for administrative fees to complete the administration of the claim fund. The total amount of costs requested by class counsel is $ 1,253,848.14, including the projected costs to complete the administration of the claim fund. The combined requested fees and expenses total $ 5,911,107.64, or more than 59% of the settlement. We are also asked to consider at this time the plaintiffs' petition for an incentive award to the representative plaintiffs.

 As discussed below, we will grant the plaintiffs' petition for an incentive award to representative plaintiffs Myles M. Spicer, John A. Brittain, and David W. Schut, in the amount of $ 10,000.00 each, for a total of $ 30,000.00. Having reviewed and considered carefully the pending petitions, and the accompanying tine records, affidavits, supporting memoranda, and other supporting materials, we are now prepared to approve a total fee award in the amount of $ 2,900,000.00, which represents 29% of the settlement. In addition, we are prepared to approve costs in the amount of $ 1,002,252.50. These figures include the amounts previously allowed as interim fees and costs awards. Thus, further funds for both fees and costs will be disbursed to class counsel in the total amount of $ 2,152,252.50. It should be noted that the total award to class counsel, for both fees and costs, is $ 3,902,252.50, which represents approximately 39% of the settlement. A reserve fund in the amount of $ 40,000.00, plus all interest earned after July 1, 1993, (which we anticipate to be approximately $ 30,792.00) shall be established for future contingencies. The remaining settlement fund, including all interest earned through July 1, 1993, shall be distributed to the class as specified below and in our Final Judgment Order, entered June 18, 1993. Any distributed funds unclaimed by class members by December 1, 1993, shall be added to the reserve fund. A separate order is attached.

  I.

 BACKGROUND

 This action was brought in the aftermath of the October 19, 1987 "Black Monday" stock market upheaval -- a day in which the stock and other equity markets across the United States experienced gross declines without comparison since the stock market crash of 1929. The Dow Jones Industrial Average fell by 508 points -- a decline of 22.6 percent from the close of trading on Friday, October 16, to the close of trading on Monday, October 19, 1987. The index for Standard & Poors 500 dropped 57.68 points, or 20.74 percent of its value. The volume of trading on all exchanges soared.

 This suit was based specifically on the events which occurred on the floor of the Chicago Board Options Exchange ("CBOE") on October 20, 1987, the day after the vast declines had taken place in the equity markets. The prices for these options on October 19 & 20, 1987, were unusually high at times and unstable throughout the day, at least in part, because of the declines and instability in the equity markets.

 The first complaint in this case was filed in March 1988. Two other complaints were filed in the next three months. The plaintiffs' principal theory of liability was premised upon the defendants' failure to disclose certain risks. Defendants included CBOE, the Options Clearing Corporation ("OCC"), and a number of market makers. In June 1988, the first complaint was consolidated with the two other similar complaints. The remainder of 1988 was devoted to sorting out the various claims, including the filing of a consolidated complaint, followed by the first motion to certify the class, class discovery, and the first notions to dismiss. The case accelerated when the second consolidated complaint was filed in March 1989. The balance of 1989 was devoted to class discovery, briefing on certification of the class and the several motions to dismiss, and frequent hearings before the court to clarify the substance and parameters of the claims. The defendants filed surreply memoranda opposing class certification and supporting the motions to dismiss. CBOE also sought a hearing to present testimony on the issue of class certification.

 In January 1990, we granted the class certification motion. The class was defined as:

 
All persons, other than market makers, who purchased OEX or OEZ series [Standards & Poors 100] index options through market orders during a rotation on October 20, 1987, at the Chicago Board Options Exchange, and who (allegedly) suffered damages from such purchases because of paying excessive prices for those options as a result of defendants' alleged misconduct.

 Class Certification Order, entered January 30, 1990. On October 24, 1990, we granted in part and denied in part the defendants' motions to dismiss, dismissing the defendant market makers from the case. Most of 1991 was devoted to discovery. Defendants CBOE's and OCC's motion for summary judgment was filed in early 1992, and expert discovery continued for several months. On December 3, 1992, we granted in part and denied in part the defendants' motion for summary judgment. The defendants' motion for summary judgment was granted with respect to the Securities Act of 1933 § 12(2) claim and denied with respect to the Securities and Exchange Act of 1934 § 10b (and Rule 10b-5) claim generally. Partial summary judgment was also granted on one issue under 10b-5 -- the risk from the way the rotations were conducted. Preparation for trial continued. On December 22, 1992, the case was resolved by settlement, in the amount of $ 10,000,000.00.

 II.

 FEE PETITION

 A. Legal Work Performed In This Case

 During the more than four years that this case was pending, class counsel allegedly devoted more than 32,000 hours to create a $ 10,000,000.00 fund for the benefit of the class members. Two firms -- Beeler, Schad & Diamond and Joyce & Kubasiak -- assumed lead counsel status in this case in the spring of 1989, when the second consolidated complaint was filed. More than 85% of the time devoted to this case was spent by these two firms. Beeler, Schad & Diamond devoted 19,700 hours to this case, which comprised approximately 60% of the total time spent by class counsel. Joyce & Kubasiak devoted 8,400 hours to this case, which comprised approximately 26% of the total time spent by class counsel.

 1. The Work Performed By Class Counsel

 We will briefly review the general work performed by class counsel on behalf of the plaintiffs in this case.

 The first complaints in this case were filed in early 1988. Motions to dismiss and to certify the class were briefed in the fall of 1988. Recognizing the force of certain of the defendants' arguments, class counsel decided in late 1988 to reconstitute the case fundamentally. This decision resulted in the filing of the second amended complaint in March 1989. Class counsel argue that they were at a significant disadvantage regarding the prosecution of this case because of their lack of familiarity with the pricing and trading of index options. They note that defendants' counsel had the assistance of CBOE's technical staff, sophisticated computer systems, and a surveillance department experienced in monitoring for rules violations and trading irregularities. Moreover, defendants' counsel had ready access to the individuals who operated the exchange and the OCC.

 To compensate for this disadvantage, class counsel employed outside experts, purchased computers, and took extensive discovery through both document examination and depositions in order to formulate their case. Together with the experts, class counsel developed the options pricing models necessary to determine damages in this case. Class counsel not only hired three experts to advise them during the case, but also frequently attended seminars conducted by experts to prepare them for trial. The subjects of these seminars included: options pricing; trading procedures at CBOE; the CBOE constitution, rules, and rule interpretations; interrelationships of markets and hedging; price and volume reporting to the public; other information reported to the public; the audit trail of October 20 OEX options transactions (regarding price, participants, clearing firms, volume, and time of transactions); net capital requirements of market makers and clearing firms; and the role of the OCC.

 From the onset, class counsel attempted to divide the legal work in a way which enabled them to pursue the litigation as efficiently as possible. According to class counsel, they met periodically to generate ideas and assignments, and review work already done, so that no person would duplicate the work of any other person. We note and appreciate the efforts of class counsel to minimize such duplication. However, in a case of this size, with so many lawyers involved, it is virtually impossible to eliminate altogether the duplication of effort. The frequent meetings themselves inevitably represented duplication. Because we feel that significant duplication of effort has occurred in this case, we have taken that fact into account in making our determination of fair and reasonable fees.

 As described below in greater detail, Futterman & Howard, in conjunction with Beigel & Sandler, responded to the motions to dismiss the complaint, assisted by Beeler, Schad & Diamond and Joyce & Kubasiak. Beeler, Schad & Diamond and Joyce & Kubasiak handled the class certification issues, class discovery, and briefing. Once the class was certified and the motion to dismiss was denied, class counsel divided the defendants and other parties among the class counsel firms so that discovery would not be extensively duplicated. Upon completion of merits discovery, Beeler, Schad & Diamond took the lead in responding to the motions for summary judgment. It also assumed responsibility for all damage analysis and expert discovery, with the assistance of Joyce & Kubasiak.

 Class certification was fought by the defendants for over a year, with detailed discovery and extensive briefing. The defendants filed affidavits supported by exhibits summarizing trading data on October 20, in an attempt to establish that: (1) market makers were buyers as much as sellers and thus public customers did not constitute a class distinct from market makers; and (2) trading in the first and second rotations extended over six hours, with hundreds of series trading at different prices under varying market conditions and interrupted by a trading halt, so that an individual investigation of the price of each series in each rotation would be required, thus destroying commonality.

 We held several hearings focusing on whether common issues would predominate. Finally, we certified the class described above. We declined, however, to certify a defendant class until the motions to dismiss were decided. Substantial briefing on the defendant class certification issue occurred during the spring and summer of 1990. Numerous hearings on this issue were held, at which class counsel were questioned regarding the definition of a defendant class of market makers who failed to appear and trade on October 20. This issue was never resolved because we granted the market makers' motions to dismiss.

 We held several hearings to define the class. We eventually determined that damages would be calculated based solely on the allegedly excessive prices paid on October 20, without regard to any subsequent or preceding sales or purchases. We then required class members to "net" losses so that any who had benefitted from excessive prices or other recoveries would be required to offset their profits and other recoveries against their losses. We drafted the final draft of the class notice, accepting most of class counsel's proposals. We then required class counsel to send notice to all potential class members. Class counsel found this to be a difficult and time-consuming endeavor, requiring them to construct a class list from scratch since CBOE had no list of individual traders or brokerage firms involved. Unfortunately, fewer than five persons responded to the notice in the Wall Street Journal. Class counsel subpoenaed 147 brokerage firms for trading records, and filed motions to compel against several. Class counsel spent several hundred hours enforcing the subpoenas. A protective order was entered in June 1990, requiring that all of the records of the brokerage firms be kept confidential.

 Class counsel spent several months preparing a database of all class members, including all relevant trade data. The hard copy data had to be evaluated by class counsel and then put into the database created for this case by the plaintiffs' computer experts. Class notice was sent in July 1990 to approximately 2,800 potential class members. In August and September 1990, notice was sent to an additional 300 potential class members. Beginning in April 1991, class counsel provided us with written status reports concerning efforts to identify class members.

 The complaint evolved as the case developed. In response to the defendants' motions to dismiss, class counsel recast the entire complaint. It was their fifth amended complaint, filed in January 1990, that we sustained in significant part in our ruling on the motions to dismiss. We found that a failure to enforce rules would not sustain an implied right of action under the Securities and Exchange Act of 1934, but sustained plaintiffs' principle claims under both section 12(2) and rule 10b-5, essentially leaving the plaintiffs with an omissions and a scheme to defraud case.

 Our decision to dismiss the market makers led class counsel to request that we reconsider our ruling. We declined to do so. Class counsel, concerned that there would be a statute of limitations problem against the market makers unless an appeal was undertaken immediately, appealed unsuccessfully to the Seventh Circuit on that issue and whether there should be an implied private right of action for the failure of CBOE to enforce its rules. Class counsel point out that the Seventh Circuit opinion recognizes that a private right of action for violation of an exchange rule might be allowed in certain circumstances. See Spicer v. Chicago Bd. of Options Exchange, Inc., 977 F.2d 255, 256 (7th Cir. 1992) ("We decline to announce a categorical rule regarding all potential private actions under this provision [Section 6(b) of the Securities and Exchange Act of 1934, 15 U.S.C. § 78f (1988)].")

 In February 1991, defendants CBOE and OCC filed their answer to the fifth amended complaint, which admitted none of the central allegations. Discovery began again. Joyce & Kubasiak handled discovery related to the market makers. Beeler, Schad & Diamond was responsible for discovery of CBOE's officers, employees, and investigating committees. Futterman & Howard and Beigel & Sandler handled discovery from the OCC. Beeler, Schad & Diamond was generally responsible for preparing document requests. It also prepared and served three sets of interrogatories. Beeler, Schad & Diamond maintained a computer-based document depository with an analysis of each document according to predetermined categories. A database was then constructed from which documents could be properly selected for depositions.

 In total, class counsel took 76 depositions; interviewed additional witnesses; subpoenaed documents from approximately 40 market makers, 147 introducing brokers, and clearing firms; examined 30,000 pages of documents and millions of trading records. According to class counsel, discovery was particularly time-consuming because of the arcane record-keeping practices of the business. They spent an enormous amount of time preparing for each deposition, with Beeler, Schad & Diamond conducting a computer run of its litigation support database to find deposition references and documents relevant to each witness. It also prepared a package of material as a predicate to each deposition. Class counsel also filed in April 1991, a motion to compel production of documents asserted to be protected by various privileges. In June 1991, we entered an order directing that most of these documents be produced to the plaintiffs. These voluminous documents were produced during the following eight weeks. As a result of the delay in document production, class counsel had to retake many depositions. In November 1991, class counsel served extensive responses to contention interrogatories, including references to deposition testimony and exhibits. Subject to limited exceptions (i.e., expert discovery), discovery closed in November 1991.

 Plaintiffs' testifying expert -- John Blin -- was deposed by the defendants in the spring and summer of 1992. During the course of his deposition, the defendants attempted to disqualify him or drive him from the case by insisting on taking discovery of all of the clients for whom he had served as investment advisor. We prohibited such discovery, granting an appropriate protective order. Beeler, Schad & Diamond deposed three of the defendants' four trial experts and Joyce & Kubasiak deposed the defendant's remaining expert.

 Robert Whaley, the defendants' lead expert, had researched extensively and written widely on index options, options pricing theory, and arbitrage-based pricing models. Whaley attempted to counter Blin's damages opinions by applying different techniques and vantage points to his analysis of OEX trade data. He disputed Blin's linkage and arbitrage theories as they applied to OEX options. He developed his own forecast model -- the "naive model" -- which formed the basis for his conclusion that plaintiffs' damages were, at most, $ 2.9 million. Working with their experts, class counsel attempted to chart the complete matrix of possible information needed in order to reproduce Whaley's results and effectively rebut his contentions. This required much time and effort on the part of class counsel.

 Another of the defendants' experts -- Merton H. Miller -- offered opinions designed to frame Whaley's quantitative analysis. Drawing from his extensive experience in this field and his work on the Miller Report, he challenged Blin's parameters regarding the linkage between cash and futures markets, disputed the extent to which the formal arbitrage impacts the fairness and orderliness of derivative markets, and cautioned against application of any hard-and-fast rules to high volatility markets.

 Another of the defendants' experts -- Mark Rubenstein -- also provided additional framework for Whaley's quantitative analysis opinions. He challenged Blin's delinkage opinions and suggested that the OEX options market could still be fair and orderly notwithstanding the absence of arbitrage links between and among CBOE (OEX), Chicago Mercantile Exchange (SPZ), and New York Stock Exchange (S&P 100 cash). He also challenged Blin's damage approach, including the propriety of applying one implied volatility value throughout October 20.

 Although both the Brady Commission Report and the SEC Staff Report were helpful to class counsel in the prosecution of this case, neither provided the level of detail necessary to establish liability and damages at trial. Through their discovery in this case, class counsel discovered alleged price and volume reporting inadequacies at the CBOE, none of which was mentioned in any of the reports. They also discovered the details regarding the reports by CBOE's Market Review Panel and Special Business Conduct Committee, none of which was made public. Class counsel determined that many of the conclusions in the SEC Staff Report and the Brady Commission Report were too simplistic for proper use at trial and found it necessary to develop their own theories and analyses.

 Upon receipt in July 1989 of CBOE's various computer trade files for October 20 OEX trades, class counsel began an intensive examination of all OEX trades at CBOE on October 20. Because this occurred prior to certification of the plaintiff class, class counsel could not depose CBOE's computer personnel to answer their questions concerning this data. Plaintiffs' experts struggled to develop a series of computer analyses to determine when each trade occurred. After class counsel exposed the alleged deficiencies in CBOE's audit trail, they still had to fix the times of all trades with reasonable accuracy in order to analyze the fairness of the prices of each series. In order to analyze the fairness of any series, it was crucial for class counsel to determine the time that each series traded at a given price. The price of each series had to be measured against the bid-ask of that series, the level of the underlying instrument, and the level of the hedge. With this information, class counsel were able to analyze the fairness of any OEX option price using an arbitrage-based pricing model, such as Black-Scholes or Cox-Ross-Rubinstein. They could also analyze the relationships of prices between series and pricing patterns among series.

 The task of analyzing October 20 trading was enormously complex. In fact, although various attempts had been reported in academic literature to analyze phenomena for other days during the October 12-23, 1987 crash period, no published author attempted analysis of October 20. Class counsel essentially reconstructed a sense of order that public customers could reasonably have expected to occur on an admittedly volatile October 20. To accomplish this feat, they analyzed the trades for many other trading days over the preceding 16 months. By July 1991, class counsel had upgraded their computer system to enable them to receive straight main frame dumps -- that is, data transfers eliminating the need for CBOE to engage in programming or other alterations of its main frame computer data files. Plaintiffs received this requested data in October 1991. In analyzing the trading data for the preceding 16 months, class counsel searched for other trading days experiencing high volatility, examined the data for reporting accuracy and pricing patterns, and measured hedging and arbitrage activity in other markets. Class counsel identified non-volatile trading days and compared findings on volatile days with comparable analysis for non-volatile trading days' results.

 Class counsel were able to apply the principles of econometrics to sample and structure the performance of this market in a way to measure the volatility of the OEX market, reasonably restore order to October 20, and account for the alleged unfairness built into many series that were traded on that day. Class counsel's efforts and results were contained in Blin's Fed. R. Civ. Proc. 26 Summary prepared in February 1992, and in his implied voluntary report forwarded in May 1991.

 In their petition, class counsel point out that the defendants have not yet made any changes in the Options Disclosure Document ("ODD"). However, they argue that the summary judgment opinion is itself prophylactic relief in that it acknowledges at least the possibility of a number of deficiencies in the ODD. Class counsel further argue that there is prophylactic relief resulting from this case in the sense that CBOE and OCC must either amend their operations or await the next lawsuit against them on the groundwork that has been laid by class counsel.

 2. Work Performed By Each Firm

 We will briefly review the role of each firm and its most active attorneys in the litigation of this case.

 a. Beeler, Schad & Diamond, P.C.

 Beeler, Schad & Diamond acted as the resource center for all firms involved in this case. It obtained documents from the defendants, analyzed, catalogued, and made available these documents to co-counsel. Beeler, Schad & Diamond maintained the deposition exhibits, providing copies and lists to all firms. Partner Stephen B. Diamond performed three principal functions on behalf of the class. First, along with partner Edward Joyce of Joyce & Kubasiak, he acted as principal spokesperson on behalf of the class. Second, he prepared the agenda for and presided at every meeting of class counsel, assigned work, and followed up to ensure that all work was completed. After the motions to dismiss were briefed, Diamond wrote most memoranda and motions that were filed with the court. Third, he took the depositions of the senior officers of the CBOE, every exchange officer or employee involved in trading on October 20, including floor officials, order book official's price and quote reporters, communications vice presidents, and others. In addition, Diamond assumed the lead role for trial preparation. The pretrial order was prepared under his supervision.

 Partner Eugene W. Beeler, Jr. performed four principal functions on behalf of the class. First, he analyzed CBOE's computerized trade data systems, analyzed the features and deficiencies of CBOE's trade audit trail, and deposed CBOE's computer systems personnel involved in CBOE's internal post-October 20 investigations. Second, he coordinated work and provided resources needed for plaintiffs' consulting and trial experts. He helped them design programs to analyze the effects of exchange actions and system irregularities on those prices. He also headed plaintiffs' efforts to assign times for all October 20 trades, and analyzed CBOE's computer trade data for rules violations. Third, he designed class counsel's document and deposition litigation support databases and instructed both staff and class counsel in its use. He also designed the computer system and selected equipment to incorporate and analyze 16 months of CBOE OEX options trade data. Fourth, he had overall responsibility for expert discovery. He prepared the plaintiffs' Fed. R. Civ. Proc. 26 Summary, analyzed Fed. R. Civ. Proc. 26 summaries of and deposed CBOE's three trial damages experts. He defended against the defendants' motion to bar plaintiffs' expert, and prepared for trial direct examination of the plaintiffs' expert, and cross-examination of the defendants' trial damages experts. He also identified and developed the plaintiffs' "comparable market" rebuttal analysis.

 Beeler also analyzed the market maker liability issues, helped identify potential defendant class members, and provided much of the research and many of the arguments supporting the duty of market makers to appear and trade. He prepared merits document requests and interrogatory sets, participated in numerous Rule 12(k) conferences, and helped depose CBOE's floor procedures expert. He supervised the subpoenaing of clearing firm trading records and prepared sections of plaintiffs' responses to various motions.

 Beginning in 1990, associate Mary E. Phillips bore principal responsibility for the identification and notification of the plaintiff class, including conducting third party discovery from 147 brokerage firms, negotiating with those firms for the production of customer trading data, and supervising the process of putting class member identity and trading data into a database, and mailing class notices to all potential class members. She was primarily responsible for implementing the document litigation support database designed by Beeler. She prepared pretrial order materials, and designed demonstrative exhibits and a case law research database for use during trial. Phillips also conducted extensive legal and factual research and drafted responses and motions, including analyzing documents produced by CBOE and government reports, researching and drafting a motion to compel CBOE and OCC to produce privileged documents, researching factual issues in documents produced by CBOE and various government reports in order to produce a comprehensive response to defendants' interrogatories, researching and drafting legal arguments related to plaintiffs' responses to the summary judgment motions, analyzing documents produced by CBOE and deposition testimony for support of factual assertions made in the responses, and conducting research in academic and securities industry periodicals regarding pre-crash descriptions of market delinkage phenomena to support the testimony of plaintiffs' expert.

 Associate Vincent J. Buzek conducted an extensive interview poll of class members to determine individual data on plaintiff class trading strategies and the events that occurred on October 20, 1987. Additionally, he conducted legal and factual research in support of plaintiffs' claims and assisted Phillips in analyzing documents produced by CBOE for entry into a litigation support database. Among other things, he subpoenaed clearing firms for the production of documents related to their capital situations and conducted depositions of many clearing firm representatives.

 The paralegals at Beeler, Schad & Diamond implemented and utilized the document and litigation support databases maintained by the firm for the benefit of all class counsel. They completed all computations and prepared the graphs attached to expert Blin's Rule 26 Interrogatory response and also the subsequent revisions of those and other graphs. They also assisted in the third party discovery of brokerage firms to ascertain identities of individual class members and maintained the database containing customer trading data. They handled questions from class members, located missing class members, abstracted depositions, and prepared demonstrative exhibits.

 Beeler, Schad & Diamond has also requested fees for clerical time spent on this case. The firm's clerical time is divided into two parts. First, substantial clerical time was devoted by assistants to paralegals which was billed at a rate less than 50% of the paralegal rate. The assistants to the paralegals input database information, organized documents, and performed various other tasks. Also, whenever paralegal work could have been accomplished by clerical staff, class counsel have reduced the rates of those paralegals to the clerical rate. Second, the firm did not charge secretarial overtime rates, but instead charged at the standard hourly clerical rate, despite the fact that the firm's clerical staff spent considerable overtime during the life of this suit.

 We now summarize the fee request presented by Beeler, Schad & Diamond. Beeler, who is billed at an hourly rate of $ 275.00, spent 4,592.60 hours on this case, for a lodestar of $ 1,262,965.00. Diamond, who is billed at an hourly rate of $ 275.00, spent 2,667.10 hours on this case, for a lodestar of $ 733,452.50. Partner Lawrence W. Schad, who is billed at an hourly rate of $ 240.00, spent 197.30 hours on this case, for a lodestar of $ 47,352.00. Philipps, who is billed at an hourly rate of $ 120.00, spent 3,875.60 hours on this case, for a lodestar of $ 465,072.00. Buzek, who is billed at an hourly rate of $ 120.00, spent 1,407.50 hours on this case, for a lodestar of $ 168,900.00. Other associates, billed at hourly rates ranging from $ 140.00 to $ 150.00, spent 540.15 hours on this case for a lodestar of $ 78,417.00. Paralegals, billed at hourly rates ranging from $ 65.00 to $ 70.00, spent 4,340.53 hours on this case, for a lodestar of $ 284,743.45. Paralegals, billed at the clerical hourly rate of $ 30.00, spent 229.20 hours on this case, for a lodestar of $ 6,876.00. Clericals, billed at an hourly rate of $ 30.00, spent 1,686.10 hours on this case, for a lodestar of $ 50,583.00. The firm lodestar totals $ 3,098,360.95, for 19,536.08 hours spent on this case.

 b. Joyce & Kubasiak, P.C.

 Joyce & Kubasiak conducted factual and legal research relating to the various causes of actions alleged against CBOE, OCC, and several participating and non-participating market makers. It also assisted in the drafting of each complaint. It participated in the briefing of all significant motions in the case, including responses to the motions to dismiss and briefs regarding the motions to certify both the defendant and plaintiff classes. Prior to the certification of the plaintiff class, the firm also participated in class discovery, including written discovery and depositions of class representatives. In support of the plaintiffs' motion to compel, the firm assisted in briefing the issue whether the self-evaluative privilege applied to investigations undertaken by CBOE and OCC after October 20. During the market maker depositions, it briefed the issue whether the attorney-client privilege limited the scope of discovery pertaining to the submissions of several market makers to the Special Business Conduct Committee ("SBCC") of the CBOE. The firm participated in preparing responses to the defendants' motions for summary judgment. Also, the firm researched a number of issues relating to the admissibility at trial of certain documents, including the Brady Report and the 1987 SEC Report. Joyce & Kubasiak also prepared motions in limine with respect to evidence which the defendants planned to introduce at trial.

 The firm conducted nearly all of the discovery relating to market maker conduct in the days prior to and on October 20. It subpoenaed and deposed approximately 40 market makers and floor brokers, including both participants and non-participants on October 20. The firm also participated in the preparation of discovery to the defendants. It also hired and prepared a former market maker -- James Harrigan -- to offer expert testimony regarding the general operation of the OEX pit and the role of the market makers. The firm spent considerable time assisting in the preparation of the plaintiffs' primary liability and damage expert -- John Blin. It also assisted in the preparation of the plaintiffs' appellate brief on the issue whether an implied private cause of action could be brought for violations of CBOE's rules and conferred with co-counsel throughout the litigation to determine pre-trial and trial strategy. The firm took the deposition of at least one of the defendants' experts and assisted substantially in the defense of the defendants' deposition of Blin.

 Together with Beeler, partner Edward T. Joyce developed in conjunction with expert Blin the "linkage" argument which was the linchpin of Blin's opinion. Joyce was responsible for developing the argument that the defendants misrepresented the market makers' duty, or at least failed to disclose to the public that the market makers had no duty to appear and make a market on any given day. In conjunction with Diamond, Joyce developed many of the Section 12(2) and 10b-5 omissions arguments. Also, Joyce was responsible for convincing Blin not to withdraw from the case, following the defendants' attack on his opinion. Joyce was responsible for most of the market maker depositions. From his deposition of First Options, he developed the argument that CBOE and OCC were motivated to permit the wholesale violation of their rules by the market makers because of a concern relating to the ability of the clearing firms to meet their financial obligations to the defendants if October 20 proved to be as disastrous as the previous day.

 We now summarize the fee request presented by Joyce & Kubasiak. Joyce, who is billed at an hourly rate of $ 275.00, spent 2,723.50 hours on this case, for a lodestar of $ 748,962.50. Partner John T. Doyle, who is billed at an hourly rate of $ 200.00, spent 48.60 hours on this case, for a lodestar of $ 9,720.00. Partner Raymond A. Flystra, who is billed at an hourly rate of $ 200.00, spent 9.30 hours on this case, for a lodestar of $ 1,860.00. Partner Steven J. Rotunno, who is billed at an hourly rate of $ 200.00, spent 10 hours on this case, for a lodestar of $ 2,000.00. Associate Paul A. Castiglione, who is billed at an hourly rate of $ 150.00, spent 2,756.80 hours on this case, for a lodestar of $ 413,520.00. Associate James X. Bormes, who is billed at an hourly rate of $ 140.00, spent 1,933.10 hours on this case, for a lodestar of $ 270,634.00. Law clerks, billed at hourly rates ranging from $ 50.00 to $ 85.00, spent 682.50 hours on this case, for a lodestar of 43,921.50. Paralegals, billed at an hourly rate of $ 65.00, spent 198.10 hours on this case, for a lodestar of $ 12,876.50. The firm lodestar totals $ 1,503,494.50, for 8,361.90 hours spent on this case.

 c. Futterman & Howard, Chtd.

 After drafting the initial complaint on behalf of Brittain, Futterman & Howard had primary responsibility for portions of the brief in opposition to the motions to dismiss. It also had significant involvement in discovery. It took the lead in examining the in-house counsel for CBOE and for OCC and had primary responsibility for the discovery taken from the OCC. The firm also sought out and interviewed prospective expert witnesses in the case and participated in the development of the plaintiffs' damage theory. The firm shared responsibility for the preparation of legal and factual arguments in plaintiffs' submissions in opposition to the defendants' motion for summary judgment.

 Partner Ronald L. Futterman was involved in all phases of the litigation. After drafting the complaint for plaintiff Brittain, he was involved in the initial preparation of discovery requests and conferences with defendants' counsel to resolve objections. He also supervised the work of junior partner James G. Bradtke, who during 1988 and 1989 was extensively involved in the case. Futterman participated in the preparation of the various amendments to the complaint and supervised the research efforts raised by the defendants' motions to dismiss. Following preparation of sections of the brief in opposition to the motions to dismiss for which the firm was responsible, Futterman reviewed and edited those drafts. He was also involved in the effort to locate an expert witness for the plaintiffs, which was particularly time-consuming because of the reluctance of many academics, who valued their relationship with the CBOE or other securities exchanges, to become involved as a testifying expert for the plaintiffs. Futterman was also responsible for developing the arguments advanced in support of class certification concerning the absence of material fact disclosures in the Options Disclosure Document. He had the responsibility for taking the depositions of in-house counsel at both CBOE and OCC. He also developed the factual case against OCC, which required his examination of thousands of pages of documents. He was responsible for taking the depositions of the executive vice president of OCC, and the president and chairman of OCC. He provided input into the development of the responses to the contention interrogatories, and also with respect to the development of the damage theory. Futterman also assembled the factual information in the record to rebut OCC's claim that it was entitled to summary judgment. He was assigned the task of preparing for and taking the deposition of at least one of the defendants' experts. He spent considerable time reviewing articles and SEC materials, including testimony of the defendants' experts before congressional committees.

 Two senior paralegals devoted approximately 30% of the total hours invested by this firm in the case. Their work involved primarily extensive library research. Working under the close supervision of class counsel and the consulting experts, the paralegals located articles in business periodicals and academic journals which concerned options pricing models and recent theoretical developments that modified the traditional approach to options pricing models. Their work required them to identify these articles and to contact university libraries around the country to obtain monographs prepared by the authors or works in progress.

 We now summarize the fee request presented by Futterman & Howard. Futterman, who is billed at an hourly rate of $ 275.00, spent 1,019.30 hours on this case, for a lodestar of $ 280,307.50. Bradtke, who is billed at an hourly rate of $ 200.00, spent 315.80 hours on this case, for a lodestar of $ 63,160.00. Partner Aram Harturian, who is billed at an hourly rate of $ 240.00, spent 1.60 hours on this case, for a lodestar of $ 384.00. Associates, billed at hourly rates of $ 150.00 and $ 160.00, spent 23.10 hours on this case, for a lodestar of $ 3,498.00. Law clerks, billed at an hourly rate of $ 50.00, spent 111.55 hours on this case, for a lodestar of $ 5,577.50. Paralegals, billed at an hourly rate of $ 70.00, spent 388.30 hours on this case, for a lodestar of $ 27,181.00. Paralegals, billed at the clerical hourly rate of $ 30.00, spent 16.00 hours on this case, for a lodestar of $ 480.00. The firm lodestar totals $ 380,588.00, for 1,875.65 hours spent on this case.

 d. Beigel & Sandler, Ltd.

 Partners Herbert Beigel, Leigh Lasky, and Philip Fertik of Beigel & Sandler had principal responsibility for the firm's involvement in this case. The four primary areas of involvement for Beigel & Sandler were: (1) conducting factual and legal research in connection with the original complaint filed against CBOE and OCC; (2) drafting the original motion for class certification and participation in the joint responses to motions to dismiss filed by the defendants; (3) handling the appeal to the Seventh Circuit from our memorandum opinion of October 24, 1990, including both briefs and oral argument; and (4) assisting co-counsel in connection with certain discovery matters including discovery related to the OCC.

 In response to the various complaints, the defendants filed motions to dismiss. Beigel & Sandler participated in the coordinated opposition to the various motions to dismiss the plaintiffs' complaints. The firm also participated in the research on the issues raised by the defendants' motion to dismiss. It drafted certain sections of the plaintiffs' responses to the motions for summary judgment and generally provided input in connection with these responses. The firm had the principal responsibility for the appeal, which focused on whether an implied right of action exists under Section 6 of the Securities and Exchange Act of 1934 for violations of the rules of a national securities exchange by the exchange or its members. Beigel & Sandler participated in class discovery, including defending depositions of class representatives, as well as participating in the other discovery related to class certification. Additionally, the firm coordinated with co-counsel on general discovery and, specifically, discovery related to the OCC.

 e. Cohen, Milstein, Hausfeld & Toll

 Cohen, Milstein, Hausfeld & Toll ("Cohen, Milstein") participated primarily in the drafting of the various complaints. It also conducted legal research at the SEC library in Washington, D.C., and engaged in other Washington-area research to obtain information concerning the October 1987 crash from various government sources. It also assisted in the drafting of certain sections of the briefs in opposition to the defendants' motions to dismiss, and defended the first deposition of Brittain. Cohen, Milstein also developed some of the legal arguments in the brief in opposition to the defendants' motion for summary judgment, and assisted Futterman & Howard in the preparation of jury instructions.

 We now summarize the fee request presented by Cohen, Milstein. Partner Herbert E. Milstein, who is billed at an hourly rate of $ 240.00, spent 4.00 hours on this case, for a lodestar of $ 960.00. Partner Michael D. Hausfeld, who is billed at an hourly rate of $ 240.00, spent 73.00 hours on this case, for a lodestar of $ 17,520.00. Partner Steven J. Toll, who is billed at an hourly rate of $ 240.00, spent 72.50 hours on this case, for a lodestar of $ 17,400.00. Partner Daniel S. Sommers, who is billed at an hourly rate of $ 160.00, spent 243.00 hours on this case, for a lodestar of $ 38,960.00. An associate, billed at an hourly rate of $ 100.00, spent 42.00 hours on this case, for a lodestar or $ 4,200.00. Law clerks, billed at an hourly rate of $ 50.00, spent 79.00 hours on this case, for a lodestar of $ 3,950.00. A paralegal, billed at an hourly rate of $ 65.00, spent 7.50 hours on this case, for a lodestar of $ 487.50. The firm lodestar totals $ 83,477.50, for 521.50 hours spent on this case.

 f. Fishman & Merrick

 Counsel at Fishman & Merrick were the initial counsel of Buys-MacGregor, one of the class representatives. Having extensive securities and commodities trading experience, the firm prepared the initial complaint filed on behalf of Buys-MacGregor and participated in the initial discovery related to that case. In September 1989, the firm withdrew from further representation when they decided with co-counsel that Fishman & Merrick's representation in arbitration proceedings of market makers, who were neither individual defendants nor members of the potential defendant class, could create the appearance of a conflict of interest. The firm's withdrawal in no way reduces the significance of their early contribution to this case and they remain entitled to compensation.

 We now summarize the fee request presented by Fishman & Merrick. Partner David A. Gennelly, who is billed at an hourly rate of $ 200.00, spent 106.25 hours on this case, for a lodestar of $ 21,250.00. Partner Kenneth F. Berg, who is billed at an hourly rate of $ 170.00, spent 77.00 hours on this case, for a lodestar of $ 13,090.00. Partner Paul Carrier, who is billed at an hourly rate of $ 200.00, spent 28.70 hours on this case, for a lodestar of $ 5,740.00. Partner Gerald L. Fishman, who is billed at an hourly rate of $ 240.00, spent 5.75 hours on this case, for a lodestar of $ 1,380.00. Associates, billed at hourly rates of $ 160.00 and $ 170.00, spent 26.00 hours on this case, for a lodestar of $ 4,367.50. A paralegal, billed at an hourly rate of $ 60.00, spent 6.75 hours on this case, for a lodestar of $ 405.00. The firm lodestar totals $ 46,232.50, for 250.45 hours spent on this case.

 B. Administrative Work Performed

 As noted above, class counsel have also submitted two petitions for administrative expenses and fees, to be decided at the same time that we resolve all remaining matters in this case. All of the administrative work was performed by Beeler, Schad & Diamond. They request that they be granted a significant percentage of their attorney time devoted to this administration.

 In their original petition for administrative fees and expenses, class counsel requested $ 232,135.50, plus an estimated $ 5,000.00 in additional future fees to cover the cost of completing the administration of the fund. However, in their supplemental petition for administrative expenses and fees, filed in mid-July 1993, class counsel inform the court that they have actually incurred additional legal fees of $ 28,800.00. Accordingly, in their original and supplemental petitions for administrative fees, Beeler, Schad & Diamond requests additional fees totalling $ 260,935.50.

 We will briefly review the administrative efforts performed by class counsel. We preliminarily approved the settlement agreement on December 22, 1992. Notice of the proposed settlement was mailed by December 28, 1992, and a proof of mailing was filed with the court on January 4, 1993. In administering the fund, class counsel engaged in discussions with the court regarding the transfer and investment of the settlement fund. With our approval, the $ 10,000,000.00 settlement fund was invested at the maximum rate of interest in United States government securities.

 As claim forms were received from potential class members, class counsel cross-checked the claimants' data against the supporting documentation in order to verify that the claim forms were properly executed. Where appropriate, class counsel contacted class members to request additional supporting documentation. The fairness hearing was held on January 28, 1993. Following discussion among class counsel, defendants' counsel, and the court, we entered a Final Judgment and Order of Dismissal with Prejudice on February 4, 1993. Because many brokerage firms had failed to provide the necessary supporting trade documentation, including the names of persons who traded on October 20, 1987, we entered an order on February 1, 1993, directing each brokerage firm to respond to class counsel. Class counsel received and processed these responses.

 Class counsel's initial report on March 22, 1993, reflected that 887 claim forms had been received and were being processed. On April 15, 1993, we approved the claim determination procedure proposed by class counsel and entered an order which was sent to all claimants, giving them until May 31, 1993, to appeal their claim determination. On May 10, 1993, class counsel filed a claim determination status report, including a four-volume appendix of claim determination calculations. Class counsel provided verification to all claimants who disagreed with their claim determinations. We held a hearing on June 10, 1993, at which we considered the objections of 36 claimants and class counsel's response to each objection, which was contained in a three-volume appendix filed with the court on June 7, 1993. Class counsel have complied promptly with our recent orders regarding the clarification and revision of claim determinations for class members who filed written objections with the court.

 We now summarize Beeler, Schad & Diamond's original request for administrative fees. Beeler, who is billed at an hourly rate of $ 275.00, spent 498.70 hours on administrative matters, for a lodestar of $ 137,142.50. Diamond, who is billed at an hourly rate of $ 275.00, spent 88.80 hours on administrative matters, for a lodestar of $ 24,420.00. Partner James Shedden, who is billed at an hourly rate of $ 180.00, spent .70 hours on administrative matters, for a lodestar of $ 126.00. Associates, billed at hourly rates of $ 120.00 and $ 150.00, spent 188.00 hours on administrative matters, for a lodestar of $ 22,569.00. Paralegals, billed at an hourly rate of $ 65.00, spent 693.80 hours on administrative matters, for a lodestar of $ 45,097.00. Clericals, billed at an hourly rate of $ 30.00, spent 92.70 hours on administrative matters, for a lodestar of $ 2,781.00. The firm lodestar totals $ 232,135.50, for 1,562.70 hours spent on administrative matters. As is apparent, the bulk of the administrative work was performed by partners who seek compensation at their full hourly rates.

 In the supplemental petition for administrative fees and expenses, Beeler, Schad & Diamond requests additional fees in the amount of $ 28,800.00. These fees were incurred in the claims administration principally by performing additional computer database analyses, preparing attorney responses to objecting claimants, and carrying out our further instructions regarding claim administration. We now summarize Beeler, Schad & Diamond's supplemental petition for attorneys' fees. Partner Beeler, who is billed at an hourly rate of $ 275.00, spent 71.30 additional hours, for a lodestar of $ 19,607.50. Partner Diamond, who is billed at an hourly rate of $ 275.00, spent 4.9 additional hours, for a lodestar of $ 1,347.50. Associate Philipps, who is billed at an hourly rate of $ 120.00, spent 22.5 additional hours, for a lodestar of $ 2,700.00. Paralegal Krejci, who is billed at an hourly rate of $ 65.00, spent 78 additional hours, for a lodestar of $ 5,070.00. Clericals Finlon and Murphy, who are billed at an hourly rate of $ 30.00, spent 2.5 additional hours, for a lodestar of $ 75.00. The firm lodestar for additional hours spent on administrative matters thus totals $ 28,800.00, representing 179.20 additional hours of legal work. Again, the bulk ($ 21,000 of $ 28,000) is administrative work performed by partners. Adding the $ 28,800.00 additional legal fees requested in the supplemental petition, the total request for administrative fees is $ 260,935.50.

 The costs of the administration of the settlement fund may be paid from the settlement fund, within the discretion of the court. 2 Newberg on Class Actions § 11.39, at p. 448, n. 180 (3d ed. 1992). Accordingly, we will consider these fees as part of the Beeler, Schad & Diamond fee request.

 C. Summary of the Fees Requested

 1. Standard Reductions

 Guided by our opinion in In the Matter of Superior Beverage/Glass Container, 133 F.R.D. 119, 130 (N.D. Ill. 1990), we are pleased to note that lead counsel (Beeler and Diamond) personally reviewed every time entry of every lawyer, paralegal, and law clerk of every firm, in an effort to make appropriate reductions in the lodestar for each firm. We have also reviewed the time records for the legal and administrative work performed in this case.

 A review of the time records indicates that there were frequent conferences held among the counsel in this case. Class counsel suggest that due to the size and complexity of the legal and factual issues in this litigation, and the large number of counsel and experts involved, it was often necessary for class counsel to meet as a group to analyze outstanding problems, resolve those problems, make work assignments, and develop litigation strategy. Some conferences were obviously necessary in order to minimize the duplication of effort -- especially where the plaintiffs' experts could quickly bring class counsel up to speed on various substantive issues. Nonetheless, after reviewing the records, we feel that the number of conferences is excessive. We have taken this fact into consideration in making our final determination of what constitutes a fair and reasonable fee.

 In Superior Beverage/Glass Container, we reviewed time entries to correct them where partners did work that could have been done by associates, and where associates did work that could have been done by paralegals, etc. Unlike most other fee petitions we have considered, in this case, the number of partner hours is significantly greater than that of associates. Partner hours expended in this case total 13,317.80. Associate hours expended total 10,832.85. Indeed, as class counsel note, this is extraordinary. Class counsel argue that it is explained by the fact that this case was simply too complicated to have a large part of the case delegated to associates. While we recognize that this case was complex, we disagree with the proposition that the legal issues involved were so complex that further delegation of work to associates, or even paralegals, was not possible. This is particularly true of the administrative work. We have great confidence in the ability of young lawyers to assimilate complicated factual scenarios, educate themselves regarding the applicable law, and then apply the law to the relevant facts. While we understand that much work must necessarily be done by partners, in large part supervising and reviewing the work of associates and paralegals, we expect delegation of work to associates and paralegals wherever possible. Accordingly, we find the hours expended by partners in this case to be excessive. We also have taken this fact into consideration in making our final fee determination.

 Lead counsel, in preparing the fee petition, struck all associate time appearing at status calls or arguments before the court. We approve of this practice, as we recall very little significant involvement of any associates at the numerous status hearings in this case.

 Where more than eight hours were recorded on any day by any one person, lead counsel examined the entries with extreme care to ensure that no excess hours were billed. We also approve of this practice. In Superior Beverage/Glass Container, we struck paralegal time which we believed should have been clerical, and thus part of firm overhead. Class counsel contend that this is an extreme remedy and have instead reviewed paralegal work, and where appropriate, reduced the time and rate from paralegal to clerical for paralegal time spent on what could be considered clerical assignments. Finally, class counsel have excluded from the fee petition all hours billed for time spent preparing the petition. Class counsel have also excluded from the administrative fee petition all hours billed for time spent preparing the petition. We agree. As we have noted in our past opinions determining fee awards, we do not feel that it is appropriate to compensate attorneys for the time spent preparing the fee petition and supporting documentation.

  2. Calculation of the Requested Fee

  In calculating the lodestar for each firm, the five lawyers who performed the lead counsel role were assigned the maximum hourly rate of $ 275.00. Class counsel claim that this rate is somewhat below the hourly rate normally charged by attorneys for work such as that performed in this case. Senior partners, attorneys with at least 15 years of experience practicing law, who did not serve as lead counsel were billed at an hourly rate of $ 240.00. All other partners were assigned an hourly rate of $ 200.00. All associates were assigned hourly rates ranging from $ 170.00 (for senior associates) to $ 100.00 (for attorneys admitted to practice in 1991 or 1992). Law clerks who had already graduated from law school were billed at an hourly rate of $ 85.00. Law student clerks were billed at an hourly rate of $ 50.00. Senior paralegals were billed at an hourly rate of $ 70.00. Junior paralegals were billed at an hourly rate of $ 65.00. Class counsel contend that these rates are conservative. We have received in confidence and reviewed defense counsel's hourly rates in this case. Based on that review, while we do not agree with class counsel that the hourly rates used to calculate the lodestar are conservative, we acknowledge that they are reasonable.

  The hours billed in this case (including the hours billed for administrative work) are enormous, totalling approximately 32,625.31. As we have noted above, the prosecution of this case involved significant duplication of effort. Where so many lawyers are involved, such duplication is nearly impossible to eliminate altogether. Nonetheless, it is our obligation to ensure that such duplication is not compensated through our award of attorneys' fees. Accordingly, we have taken this fact into consideration in making our fee determination. Class counsel have requested the following fees for work performed through the settlement date of December 22, 1992: Firm Lodestar Amount Requested Beeler, Schad & Diamond $ 3,098,360 $ 2,532,289 Joyce & Kubasiak 1,503,494 1,228,805 Beigel & Sandler 266,936 218,166 Futterman & Howard 380,588 311,054 Cohen, Milstein 83,477 68,225 Fishman & Merrick 46,232 37,785 TOTAL $ 5,379,089 $ 4,396,324

  Class counsel's method for calculating the fees requested is straightforward: From the $ 10,000,000.00 settlement fund, class counsel subtracted the disbursements and divided the remaining amount equally between class members and class counsel. In addition, Beeler, Schad & Diamond has requested $ 260,935.50 for administrative fees; this additional amount increases Beeler, Schad & Diamond's total fee request to $ 2,793,224.50. The total class counsel request for fees, including administrative fees, thus amounts to $ 4,657,259.50, or 46.5% of the settlement.

  3. Reaction of Class Members to the Fee Petition

  We have received much commentary on the fees and costs requested by class counsel from the class members themselves. We did not solicit these commentaries. Class counsel sent a copy of the fee petition to all claimants who class counsel believed had valid claims, soliciting their support for the fee petition. Class counsel also provided the potential claimants with a form letter addressed to this court, in which the author supports the full award of the fee and costs petition. Most of the letters received were based on this form letter. Some claimants sent their letters directly to us; others sent their letters to class counsel, who then filed copies of the letters with us. While we emphasize that we did not request the comments of class members on this issue, we will briefly summarize some of their reactions to the fee petition as we feel that their reactions are important and should be considered in determining the fee award.

  In total, we received directly 96 letters concerning the petition for fees and costs. Class counsel has submitted for our review 81 additional letters, which apparently were sent to class counsel rather than to us directly. It should be noted preliminarily that nearly all of the letters received expressed sincere appreciation for the efforts of class counsel in creating the settlement fund. Of the letters received directly by the court, 18 letters were sent by claimants whose final claim determinations revealed that they were not actually class members. Accordingly, we have not considered these letters in connection with our evaluation of the fee and costs petition.

  Of the letters written by class members and received directly by the court, 53 stated that, after reviewing the petition for attorneys' fees and reimbursement of litigation expenses filed by class counsel, class counsel made an excellent recovery and should therefore be granted in full the fees and expenses requested. The 81 additional letters filed by class counsel also favor a full award to class counsel of the fees and expenses requested in the petition.

  Of the letters written by class members and received by the court, 25 letters object in some way to the fee and costs petition. Among these objections, 11 letters noted that while the authors felt that the petition request was too high, they felt unqualified to advise the court regarding what amount would constitute a fair and reasonable fee for the attorneys involved in this case. These objectors left this issue to our determination, asking us to keep in mind that the class members (and not class counsel) are those who really suffered the losses in this case. Some of these letters further noted the fact that the $ 10,000,000.00 settlement fund is insufficient to compensate the class members for more than a mere fraction of their actual October 20, 1987 OEX losses. We acknowledge this fact and consider it in our determination of the fee petition.

  One objection letter stated that while class counsel's request for fees and costs in excess of 50% of the settlement fund is excessive, in light of their risks of time and expenses, they should be awarded a minimum of 40% for fees and expenses combined. Seven objection letters stated that class counsel should be awarded no more than one-third of the settlement fund to cover their fees and expenses. One objection letter stated that an award to class counsel of 30% of the settlement fund would be the most fair and equitable distribution. One letter stated that while an award of one-third is standard in cases of this type, the award here should be less than 30% because of the limited size of the settlement fund. One letter suggested that our grant of fees and costs not exceed 25% of the settlement fund. Another letter suggested that our grant of fees and costs not exceed 20% of the settlement fund. One letter suggested that we reduce our award to half of the amounts requested by class counsel for fees and costs. Finally, one letter suggested an award of attorneys' fees in the amount of $ 2,930,000.00, plus all costs.

  We appreciate the efforts of the class members who took the time to review carefully the rather lengthy fee and costs petitions filed in this case, and who wrote to us with their comments. We assure them that we have put forth our best efforts to determine a fair and reasonable fee for class counsel in light of all of the facts as well as class members' comments.

  D. Analysis of the Fee Petition

  1. The Common Fund Doctrine

  Under the United States' no-fee rule, a court generally may not award attorneys' fees to a prevailing party unless it is expressly authorized by statute. Alyeska Pipeline Service Co. v. The Wilderness Society, 421 U.S. 240, 44 L. Ed. 2d 141, 95 S. Ct. 1612 (1975). However, the Supreme Court has long recognized an exception to this rule: Where a representative plaintiff successfully establishes or protects a fund in which other class members have a beneficial interest, the costs of litigation may be spread among the fund's beneficiaries. See Trustees v. Greenough, 105 U.S. 527, 532, 26 L. Ed. 1157 (1882); Mills v. Electric Auto-Lite Co., 396 U.S. 375, 389-97, 24 L. Ed. 2d 593, 90 S. Ct. 616 (1970); Alyeska Pipeline Service, supra. Under the common fund doctrine, attorneys for the successful party may petition the court for a portion of the fund as compensation for their efforts in creating or protecting that fund. The Supreme Court has noted that, "a litigant or lawyer who recovers a common fund for the benefit of persons other than himself or his client is entitled to a reasonable attorney's fees from the fund as a whole." Boeing Co. v. Van Gemert, 444 U.S. 472, 478, 62 L. Ed. 2d 676, 100 S. Ct. 745 (1980).

  2. Determining A Reasonable Fee: The Hybrid Approach

  Determination of what constitutes a fair and reasonable fee award from a common fund is a delicate undertaking, calling for the informed exercise of judicial discretion under all the circumstances of the case. We have elsewhere discussed the history of attorneys' fee awards and the different approaches that various courts have adopted for determining fair and reasonable attorneys' fees. See In re Folding Carton Antitrust Litigation, 84 F.R.D. 245, 255-63 (N.D. Ill. 1979) (summarizing history of fee awards and approaches to calculating a fair and reasonable fee). In short, most courts utilize either a lodestar time/rate analysis or a percentage of the common fund analysis to determine an appropriate fee award. The Seventh Circuit has indicated that the decision whether to award attorneys' fees according to the lodestar method or the percentage of the fund approach rests in the sound discretion of the trial court. Harman v. Lyphomed, Inc., 945 F.2d 969, 974 (7th Cir. 1991) ("The decision of the whether ...


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