965 F.Supp.2d 369 (S.D.N.Y. 2013), 09 MD 2070 (SHS), In re Citigroup Inc. Securities Litigation

Docket Nº:09 MD 2070 (SHS), 07 Civ. 9901 (SHS)
Citation:965 F.Supp.2d 369
Opinion Judge:SIDNEY H. STEIN, U.S. District Judge.
Party Name:IN RE CITIGROUP INC. SECURITIES LITIGATION
Attorney:Nos. 09 MD 2070 (SHS), 07 Civ. 9901 (SHS) Daniel Brecher, Plaintiff (1:09-md-02070-SHS), Pro se. For Wendy Mackey, Sandra Stewart, Plaintiffs (1:09-md-02070-SHS): Bradley Syfrett Odom, Odom & Barlow Pa - Pensacola Fl, Pensacola, Fl; Martin Bruce Sipple, PRO HAC VICE, Ausley & McMullen, P.A., Tall...
Case Date:August 01, 2013
Court:United States District Courts, 2nd Circuit, Southern District of New York
 
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965 F.Supp.2d 369 (S.D.N.Y. 2013)

IN RE CITIGROUP INC. SECURITIES LITIGATION

Nos. 09 MD 2070 (SHS), 07 Civ. 9901 (SHS)

United States District Court, S.D. New York

August 1, 2013

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[Copyrighted Material Omitted]

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Daniel Brecher, Plaintiff (1:09-md-02070-SHS), Pro se.

For Wendy Mackey, Sandra Stewart, Plaintiffs (1:09-md-02070-SHS): Bradley Syfrett Odom, Odom & Barlow Pa - Pensacola Fl, Pensacola, Fl; Martin Bruce Sipple, PRO HAC VICE, Ausley & McMullen, P.A., Tallahassee, FL; Robert N. Clarke, Ausley & McMullen-Tallahassee Fl, Tallahassee, FL.

For Citigroup Global Markets, Inc., Defendant (1:09-md-02070-SHS): Victor H. Polk, Jr., PRO HAC VICE, Greenberg Traurig LLP, Boston, MA.

For Leslie G Shumsker, Defendant (1:09-md-02070-SHS): Michael B. Cosentino, Seegel, Lipshutz & Wilchins, P.C., Wellesley, MA.

For ATD Group, Lead Plaintiff (1:07-cv-09901-SHS): Lauren Wagner Pederson, Peter S Linden, LEAD ATTORNEY, Ira M. Press, Kirby McInerney LLP, New York, NY.

For Tillie Saltzman, Individually, Tillie Saltzman, on behalf of all others similarly situated, Plaintiffs (1:07-cv-09901-SHS): Samuel Howard Rudman, LEAD ATTORNEY, Robbins Geller Rudman & Dowd LLP(LI), Melville, NY.

For Public Employees' Retirement, Association of Colorado, Tennessee Consolidated Retirement System, Plaintiffs (1:07-cv-09901-SHS): Andrew J Entwistle, LEAD ATTORNEY, Entwistle & Cappucci LLP (NYC), New York, NY; Peter S Linden, LEAD ATTORNEY, Kirby McInerney LLP, New York, NY.

For Sjunde Ap-Fonden, Fjarde Ap-Fonden, Pensionskassernes Administration A/S, Plaintiffs (1:07-cv-09901-SHS): Andrew J Entwistle, LEAD ATTORNEY, Entwistle & Cappucci LLP (NYC), New York, NY.

For John A. Baden, Warren Pinchuk, Anthony Sedutto, Edward Claus, Carol Weil, Plaintiffs (1:07-cv-09901-SHS): Peter S Linden, LEAD ATTORNEY, Ira M. Press, Kirby McInerney LLP, New York, NY.

For Mr. Mark C. Weldon, Plaintiff (1:07-cv-09901-SHS): Vincent J. Montell, Quintairos Prieto Wood & Boyer, P.A, Phoenix, AZ.

For Lennard Hammerschlag, Consolidated Plaintiff (1:07-cv-09901-SHS): Dustin Peter Mansoor, LEAD ATTORNEY, Houser & Allison, APC, New York, NY; James Stuart Notis, LEAD ATTORNEY, Gardy & Notis, LLP, New York, NY.

For David Garden, Movant (1:07-cv-09901-SHS): Joseph Harry Weiss, Weiss & Lurie, New York, NY.

For Edward Altman, Elaine Altman, Henrietta Whitcomb, Movants (1:07-cv-09901-SHS): Ira M. Press, Kirby McInerney LLP, New York, NY.

For Jonathan Butler, M. David Diamond, David Whitcomb, Henrietta Whitcomb, Movants (1:07-cv-09901-SHS): Peter S Linden, LEAD ATTORNEY, Ira M. Press, Kirby McInerney LLP, New York, NY.

For State Teachers Retirement System of Ohio, Division of Investment of the Treasury of the State of New Jersey, State Universities Retirement System of Illinois, Movants (1:07-cv-09901-SHS): Gerald H. Silk, Bernstein Litowitz Berger & Grossmann LLP, New York, NY; Jeffrey Craig Block, Berman DeValerio (MA), Boston, MA.

For U.S. Public Fund Group, Movant (1:07-cv-09901-SHS): Anne Faith O'Berry, Berman Devalerio Pease Tabacco Burt & Pucillo, West Palm Beach, FL; Jeffrey Craig Block, Berman DeValerio (MA), Boston, MA; Michael Jameson Pucillo, Berman DeValerio, Palm Beach Gardens, Fl.

For Citigroup Inc., Charles O. Prince, Robert E. Rubin, Gary L. Crittenden, Robert Druskin, Thomas G. Maheras, Michael Stuart Klein, David C. Bushnell, Defendants (1:07-cv-09901-SHS): Richard A. Rosen, Susanna Michele Buergel, LEAD ATTORNEY, Jane Baek O'Brien, Paul, Weiss, Rifkind, Wharton & Garrison LLP (NY), New York, NY.

For Stephen R. Volk, Sallie L. Krawcheck, Todd S. Thomson, John C. Gerspach, Vikram Pandit, Defendants (1:07-cv-09901-SHS): Richard A. Rosen, LEAD ATTORNEY, Jane Baek O'Brien, Paul, Weiss, Rifkind, Wharton & Garrison LLP (NY), New York, NY.

For C. Michael Armstrong, Alain J.P. Belda, George David, Kenneth T. Derr, John M. Deutch, Roberto Hernandez Ramirez, Ann Dibble Jordan, Klaus Kleinfeld, Andrew N. Liveris, Dudley C. Mecum, Anne M. Mulcahy, Richard D. Parsons, Dr. Judith Rodin, Robert E. Rubin, Robert L. Ryan, Franklin A. Thomas, Winfried Bischoff, William R. Rhodes, Michael S. Helfer, Consolidated Defendants (1:07-cv-09901-SHS): Lawrence B. Pedowitz, LEAD ATTORNEY, Wachtell, Lipton, Rosen & Katz, New York, NY.

For Steven J. Freiberg, Lewis B. Kaden, Consolidated Defendants (1:07-cv-09901-SHS): Lawrence B. Pedowitz, LEAD ATTORNEY, Wachtell, Lipton, Rosen & Katz, New York, NY; Richard A. Rosen, LEAD ATTORNEY, Jane Baek O'Brien, Paul, Weiss, Rifkind, Wharton & Garrison LLP (NY), New York, NY.

For ST. STEPHEN, INC., SMOKESTACK LIGHTENING LTD., Marshall Orloff, ADR Providers (1:07-cv-09901-SHS): Forrest Scott Turkish, LEAD ATTORNEY, Forrest Scott Turkish, Law Office, Bayonne, NJ.

For Daniel Brecher, Scott Short, Jennifer Murphy, Chad Taylor, Mark Oelfke, Paul Koch, Objectors (1:07-cv-09901-SHS): Mark C. Rifkin, Matthew Moylan Guiney, Wolf Haldenstein Adler Freeman & Herz LLP, New York, NY. Steve A. Miller, P.C. Profit Sharing Plan, Objector (1:07-cv-09901-SHS), Pro se, Denver, CO. Theodore H. Frank, Objector (1:07-cv-09901-SHS), Pro se, Fairfax, VA.

For Mr. Eric Behar, Objector (1:07-cv-09901-SHS): Leon Isidore Behar, Leon I. Behar, P.C., New York, NY.

OPINION

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SIDNEY H. STEIN, U.S. District Judge.

I. Introduction and Summary

Plaintiffs bring this securities fraud action on behalf of a class of purchasers of Citigroup, Inc. common stock against that company and certain of its officials. Plaintiffs allege that Citigroup misled investors by understating the risks associated with assets backed by subprime mortgages and overstating the value of those assets, in violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934; as a result, all those who purchased Citigroup common stock between February 26, 2007 and April 18, 2008 paid an allegedly inflated price. The parties have now reached a settlement of their dispute for $590 million to be paid to the class. The Court must determine whether that settlement is fair,

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reasonable, and adequate and what a reasonable fee for plaintiffs' attorneys should be.

On plaintiffs' unopposed motion pursuant to Federal Rule of Civil Procedure 23, the Court preliminarily approved that proposed settlement, certified the class for settlement purposes, and provided for notice to the class of the proposed settlement. In certifying the class, the Court appointed the proposed representatives as class representatives and appointed Kirby McInerney LLP as lead counsel for the class (" Kirby," " Lead Counsel," or " Counsel" ). Now before the Court are two motions: (1) plaintiffs' motion for final approval of the class action settlement and approval of the plan of allocation (Dkt. No. 164) and (2) Lead Counsel's motion for an award of attorneys' fees and reimbursement of litigation expenses (Dkt. No. 165). The Court considered written submissions both supporting and opposing the settlement and held a fairness hearing on April 8, 2013 pursuant to Rule 23(e)(2).

The Court finds that the proposed settlement is fair, reasonable, and adequate and should be approved. Class members received adequate notice and had a fair opportunity to object or exclude themselves; very few have voiced their opposition. The settlement is procedurally sound because it was negotiated at arm's length by qualified counsel. The Court also concludes that the settlement is substantively fair. Although the $590 million recovery is a fraction of the damages that might have been won at trial, it is substantial and reasonable in light of the risks faced if the action proceeded to trial.

The Court also approves the proposed plan of allocation, subject to a clarification sought by certain objecting class members. Specifically, the issue was how to treat purchases of Citigroup stock made through an employee stock-purchase plan in which employees committed to purchases on one date, determined their price on another date based on six dates spread over six months, and then received their shares on yet another date. The Court agrees with the objectors that the substance, rather than the form, of those transactions should determine how the purchasers are compensated in connection with the settlement. For purposes of the alleged securities law violations, plan members purchased shares as the money was deducted each month, and the plan of allocation should reflect that the share price inflation at the end of each month approximates their harm.

The Court also concludes that Lead Counsel is entitled to a fee award, albeit a smaller one than it has proposed, as well as reimbursement of the requested litigation expenses. Because of the size of the settlement, the Court places particular emphasis on the lodestar cross-check. Lead Counsel undoubtedly secured an impressive recovery for the class and legitimately expended millions of dollars in attorney and staff hours doing so. But the Court finds that Counsel's proposed lodestar is significantly overstated.

The Court makes the following deductions in the lodestar:

1) $4 million in time that one plaintiffs' firm expended in an unsuccessful attempt to become Lead Counsel and now wants the class to pay for that unsuccessful effort; 2) $7.5 million for 16,292 hours of attorneys' time spent in pursuing discovery after the parties reached an agreement to settle their dispute. That time was spent largely on " document review" by contract attorneys, a full twenty of whom were hired for the first time on or about the same day the parties notified the Court

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that an agreement in principle had been reached;

3) A $12 million reduction by applying a...

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