The opinion of the court was delivered by: G. PATRICK MURPHY, Chief Judge, District
This matter is before the Court on Class Counsel's Motion for
Award of Attorneys' Fees, Costs and Incentive Awards ("Fee
Request") (Doc. 352). Based upon the entire record in this case,
including the objections and other comments filed by the Class
Members and the arguments presented at the hearing held on August
8, 2005, the Court finds and orders as follows:
This litigation started November 1, 1999, and will continue for
at least another year as the parties continue to litigate two of
the central issues before the United States Court of Appeals and
potentially the United States Supreme Court. IBM's 1995
implementation of a pension equity formula and its 1999
implementation of a cash balance formula raise six difficult and
novel issues. It was clear when this case was filed that it would
be hard fought and was likely to be ultimately resolved by the
Court of Appeals for the Seventh Circuit or perhaps the United
States Supreme Court. In fact, early in the case the Court
observed at an oral argument that "I understand . . . whatever I do here will be reviewed de novo in the Court of
Appeals. And of the cases I have handled here, I believe that
this case has the best chance of ending up in the United States
Supreme Court. . . ." Transcript of Oral Arg. at 4:23-5:8 (Dec.
On September 17, 2001, this Court certified the case as a class
action pursuant to Rule 23(b)(2) of the Federal Rules of Civil
Procedure on behalf of three Subclasses. Subclass 1 consists of
Class Members who accrued benefits under the Pension Credit
Formula adopted by the Plan effective January 1, 1995, but did
not accrue any benefits under the Cash Balance Formula adopted by
the Plan effective July 1, 1999. Subclass 2 is comprised of Class
Members who accrued a benefit under the Cash Balance Formula
adopted by the Plan effective July 1, 1999. There are more than
250,000 members of Subclasses 1 and 2. Subclass 3 consists of
approximately 15,000 individuals who were participants in the
Plan as of July 1, 1999, but did not complete five years of
service such that they did not vest in their Plan benefit. The
Subclass 3 claims were settled under the terms of a Settlement
Agreement approved by the Court on January 10, 2005 (see Docs.
287, 288). IBM subsequently filed an interlocutory appeal
challenging the certification of the case as a class action. This
appeal was denied by the United States Court of Appeals for the
Seventh Circuit. See Cooper v. IBM, No. 01-8034 (7th Cir.
Nov. 19, 2001).
This Court is familiar with the complex and novel issues
involved in this case, as well as the work of Class Counsel in
prosecuting the claims for more than five years of this
hard-fought litigation. This prosecution has included extensive
discovery, expert witness depositions, and voluminous briefing on
all of the factual and legal issues, as well as numerous court
On May 18, 2005, the parties entered into a Settlement
Agreement ("Settlement"). Following a hearing on August 8, 2005,
the Court approved that Settlement as fair and reasonable and in the best interests of the Class following the required
notice to Class Members.
The Settlement requires IBM to amend the Plan to provide
additional pension benefits to eligible members of the Class
which, when added to the amount of attorneys' fees awarded by the
Court to Class Counsel, will total in value $314,293,000 as of
November 1, 2006. While the Settlement provides that Defendants
will appeal the Court's decision regarding liability on the Cash
Balance Claim and the Always Cash Balance Claim, the Settlement
resolves the issues regarding the remedies that should be awarded
with respect to these claims in the event this Court's rulings
are upheld on appeal. IBM agrees that if the Court's liability
ruling in favor of the Class on the Always Cash Balance Claim is
upheld on appeal, the Plan will be amended to provide additional
pension benefits. The additional value of those benefits,
including the attorneys' fees awarded by the Court to Class
Counsel in connection with that claim, will be $620,000,000 (in
addition to the guaranteed amount of $314,293,000). IBM also
agrees that if the Court's liability ruling in favor of the Class
on the Cash Balance Claim is upheld on appeal, the Plan will be
amended to provide additional pension benefits which, along with
the attorneys' fees awarded by the Court to Class Counsel in
connection with that claim, will total $1,714,293,000.
Notably, the Settlement provides that any benefit provided to a
participant as a result of the Settlement Agreement is an
independent Plan obligation separate, apart from, and in addition
to any other benefit accrued by a participant before the
Settlement Date under the Cash Balance Formula, the Pension
Credit Formula, or any formula under any other employee pension
benefit plan sponsored by IBM. In addition, any pension benefit a
participant would otherwise accrue under any Plan formula, or any
other employee pension benefit plan sponsored by IBM based on
service after the Settlement Date, will not be reduced or offset
by and will not wear away any participant's Settlement Benefit. Finally, IBM waives any defense or right to
assert any precedent or policy that might preclude or prohibit
the entry of retroactive relief.
Class Counsel seeks fees on a decreasing percentage as follows:
(1) an amount equal to 29% of the amount of any Settlement
Benefits recovered up to $250 million; (2) an amount equal to 25%
of the amount of any Settlement Benefits recovered in excess of
$250 million up to the amount of $750 million; (3) an amount
equal to 21% of the amount of any Settlement Benefits recovered
in excess of $750 million up to the amount of $1,250 million; and
(4) an amount equal to 17% of any Settlement Benefits recovered
in excess of $1,250 million. If the Class prevails on all claims,
the blended fee produced by the above percentages is 22.25%.
Class Counsel also requests incentive awards of $40,000 for Ms.
Cooper and $20,000 for Ms. Harrington to be paid out of the
attorneys' fees and costs award. Class Counsel is not requesting
any additional recovery to reimburse them for the expenses they
already have incurred or will incur in the future but have agreed
to reimburse themselves for those costs out of whatever fees are
awarded by this Court.
In considering Class Counsel's Fee Request, this Court is
guided by the numerous decisions of the Seventh Circuit requiring
the Court to do its "best to award counsel the market price for
legal services, in light of the risk of nonpayment and the normal
rate of compensation in the market at the time." In re Synthroid
Marketing Litig., 264 F.3d 712, 718 (7th Cir. 2001)
("Synthroid I"); see also Florin v. Nationsbank of Ga., N.A.,
34 F.3d 560, 565 (7th Cir. 1994) (directing district court to
determine fair attorneys' fees in class action by considering the
probability of success at the outset of the litigation); In re
Continental Ill. Sec. Litig., 962 F.2d 566, 572 (7th Cir.
1992) ("The object in awarding a reasonable attorney's fee . . .
is to give the lawyer what he would have gotten in the way of a
fee in an arm's length negotiation, had one been feasible.").
Where, as here, it is "impossible to know ex post exactly what terms would have resulted from
arm's-length bargaining ex ante, courts must do their best to
recreate the market by considering factors such as actual fee
contracts that were privately negotiated for similar litigation,
information from other cases, and data from class-counsel
auctions." Taubenfeld v. Aon Corp., No. 04-3140, 2005 WL
1560331, at *1 (7th Cir. July 5, 2005).
Based on the evidence before the Court regarding the market for
class counsel in cases of this type and a long line of ERISA
decisions, it is appropriate to award Class Counsel a percentage
of recovery fee in this case. Florin, 34 F.3d at 563; Mark
Berlind, Attorney's Fees under ERISA: When is an Award
Appropriate?, 71 Cornell L. Rev. 1037, 1060-61 (1986) ("Applying
the common benefit doctrine reflects the statute's purpose. . . .
Nothing in ERISA indicates that Congress intended to preempt the
common benefit doctrine."). As the Ninth Circuit stated in
Staton v. Boeing Company, 327 F.3d 938, 967 (9th Cir.
2003), "We conclude, as have the two other circuits that have
addressed the issue, that there is no preclusion on recovery of
common fund fees where a fee-shifting statute applies." Citing
Brytus v. Spang & Co., 203 F.3d 238, 246-247 (3rd Cir.
2000); Cook v. Niedert, 142 F.3d 1004 (7th Cir. 1998). This
reasoning is appropriate here, where an award of attorneys' fees
under ERISA's fee-shifting statute is not automatic and depends
upon a variety of factors. See, e.g., Quinn v. Blue Cross & Blue
Shield Ass'n., 161 F.3d 472, 478 (7th Cir. 1998).
The Seventh Circuit has indicated that "the decision whether to
use a percentage method or a lodestar method remains in the
discretion of the district court." Florin, 34 F.3d at 566. In
exercising that discretion, the Seventh Circuit has noted that in
common fund/benefit cases, "the measure of what is reasonable [as
an attorney fee] is what an attorney would receive from a paying
client in a similar case." Montgomery v. Aetna Plywood, Inc.,
231 F.3d 399, 408 (7th Cir. 2000); see also In re Continental Illinois Securities Litig., 985 F.2d 867
(7th Cir. 1992). Thus, "[t]he approach favored in the Seventh
Circuit is to compute attorney's fees as a percentage of the
benefit conferred on the class," particularly where that
percentage of the benefit approach replicates the market.
Williams v. General Elec. Capital Auto Lease, No. 94-C-7410,
1995 WL 765266, *9 (N.D. Ill. Dec. 26, 1995); see also Long v.
Trans World Airlines, Inc., 1993 WL 121824, *1 (N.D. Ill. Apr.
19, 1993). Here, a percentage of the benefit approach clearly
best replicates the market.
The uncontested evidence in this case is that Plaintiffs could
not afford to retain counsel on any basis other than a contingent
fee. Cooper Dec. at ¶ 3. Class representative Kathi Cooper
attests that she would not have hired Class Counsel on an hourly
basis. Id. There is no reason to believe that any other Class
Member would have been willing to pay hourly fees in the hope
that the case would be successful and the fees paid ultimately
recovered from IBM. Class Counsel, nationally recognized experts
in ERISA pension benefit cases, attest that they have not and
would not accept a similar case on any basis other than a
contingency fee basis. Sprong Aff. at ¶ 6. The record before the
Court establishes that no other capable counsel was willing to
take the case on any basis. Cooper Dec. at ¶ 5; Carr Dec. at ¶¶
8-14; Lewis Dec. at ¶¶ 11-14. Thus, the undisputed evidence is
that the market for legal services for this litigation is a
contingency fee. In fact, even the vast bulk of the objectors do
not disagree that a percentage of the recovery approach is
appropriate in this case, they merely dispute the appropriate
In determining what an appropriate percentage should be in the
unique circumstances of this case, the Court has considered a
number of factors. Class Counsel submitted affidavits and briefs
setting forth a large number of other large ERISA class actions
in which counsel have been awarded fees similar to or greater
than the percentages requested here. In addition, this Court is
personally familiar with fees in a significant number of relatively similar
cases that have been awarded in this District, and the Fee
Request in this ...