Harman v. Lyphomed, Inc.
| Decision Date | 04 April 1990 |
| Docket Number | No. 88 C 0476.,88 C 0476. |
| Citation | 734 F. Supp. 294 |
| Parties | Sarah HARMAN, et al., Plaintiffs, v. LYPHOMED, INC., et al., Defendants. |
| Court | U.S. District Court — Northern District of Illinois |
Jules Brody, Mark Levine, Stull, Stull & Brody, New York City, Lawrence Walner, Daniel A. Edelman, Lawrence Walner & Associates, Ltd., Chicago, Ill., for plaintiffs.
William R. Carney, John B. Bitner, Larry L. Thompson, John W. Rotunno, Bell, Boyd & Lloyd, Chicago, Ill., George J. Casson, Jr., James E. O'Halloran, Jr., Clifford G. Kosoff, O'Halloran, Kosoff & Miller, P.C., Northbrook, Ill., Thomas A. Foran, Nicholas J. Etten, Stephen A. Gorman, Foran Wiss & Schultz, Chicago, Ill., for defendants.
The court has previously approved the settlement of this class action. Still pending is the petition for attorney's fees, which are to be paid out of the settlement fund. The class received a base settlement amount of $9,900,000. As of January 31, 1990, the settlement fund also included an additional $600,0001 of interest. The fund has not yet been distributed to the class, apparently pending resolution of the attorney's fees issue. One member of the class appeared at the settlement hearing and raised objections to the fee petition. Regardless of how many class members object to the fee petition, this court has a duty to determine if the fees are reasonable. Purdy v. Security Savings & Loan Association, 727 F.Supp. 1266, 1269 (E.D. Wis.1989).
Counsel for plaintiffs request a percentage of the base settlement amount. They request an award of 30% of the base settlement amount, which is $2,997,000. Alternatively, counsel request a lodestar amount of $1,376,423 times a 2.177 multiplier for a total of $2,996,473.2 Counsel also request $131,900 for expenses.
This case began as a number of separate cases brought by various plaintiffs. Subsequently, the individual cases were either dismissed or consolidated and one class action was brought with most of the plaintiffs in the separate cases being named plaintiffs in the one remaining case. A shareholders' derivative action was also consolidated with the class action. The lawsuit sought damages for alleged securities fraud and also sought to reform manufacturing practices of the corporation. The fraud and other misconduct centered around violations of the United States Food and Drug Act and regulations thereunder. Prior to these suits, Lyphomed had been the subject of investigations by the FDA and some of the alleged fraud related to public statements regarding these investigations. Prior to the settlement of this suit, the FDA had already ordered, and Lyphomed had consented to, certain reforms. Although, class counsel represents certain reforms at Lyphomed as a success of this suit, the settlement provides for, at most, modest reforms in addition to what the FDA had already obtained. The suit was successful in obtaining about $10,000,000 for the class and the court found this to be a fair settlement. Class counsel state that this is probably about half of what actual damages to the class were. While the settlement is fair, it is not an "extraordinary damage recovery" as counsel claims. Also, when originally proposed, the settlement was arranged in a manner that may have required members of the class who still owned Lyphomed stock to pay a portion of the settlement in that Lyphomed itself, which they owned a portion of, would pay the settlement. Thus, the settlement would have been worth less than the $9,900,000. Counsel for plaintiffs failed to point out this significant factor when presenting the proposed settlement to the court. The issue, however, later became moot because all the stock of Lyphomed was bought by another corporation, so that, at the time the settlement was approved, no class member still owned any Lyphomed stock. It should also be noted that this case did not involve protracted litigation. The case was filed in January 1988. Substantial settlement negotiations began in November 1988. A memorandum of understanding was reached in April 1989 and a stipulation of settlement was entered into in June 1989. The court does recognize, however, that, prior to settlement, defendants were not cooperative in providing discovery.
When the various suits were initially consolidated into one class action, this court warned counsel that fees would not be awarded for duplicative work resulting from the large number of attorneys involved in the case. Nevertheless, a fee petition has been presented which contains attorney's fees of $1,432,115 based on 6,678 hours of work by 61 different attorneys at 10 firms in Chicago, New York City, and Philadelphia.3 Work was done by 31 partners, 28 associates,4 and 2 student associates.5 Counsel argue that not as many attorneys worked on the case as it may appear, since a number of the attorneys billed an insignificant amount of time. Eighteen attorneys billed less than 10 hours, 19 billed 10 to 49 hours, 9 billed 50 to 99 hours, and 15 billed 100 hours or more. This is still a large number of attorneys billing a substantial amount of time and it appears that such circumstances resulted in otherwise unnecessary duplication of effort. Cf. Procter & Gamble Co. v. Weyerhaeuser Co., 711 F.Supp. 904, 905 (N.D.Ill.1989). This is borne out by the specific billings discussed below.
The rates billed are excessive. In the 4 Chicago firms, partners billed an hourly rate of $195 to $300, associates $105 to $175, and paralegals $60 to $65. In the 4 New York firms, partners billed an hourly rate of $275 to $375, associates $1206 to $240, and paralegals $70 to $100. In the 2 Philadelphia firms, partners billed an hourly rate of $260 to $325, associates $130 to $285, and paralegals $60 to $70.
Considering that a bulk of the work claimed by the attorneys consisted of discovery (primarily of documents), the bulk of the work should have been performed by those charging lower rates, i.e., the associates and paralegals. Nevertheless, 3 more partners than associates participated in this case. More to the point, partners billed 3076 hours, whereas associates only billed about 13% more (3472 hours7), and paralegals only billed for 808 hours. Partners billed $760,954 for an average hourly rate of $247. Associates billed $658,536 for an average hourly rate of $190. Categorized by rate, 31% of the hours were billed at $120 to $175, 34% at $180 to $225, 10% at $230 to $270, 17% at $275 to $320, and 8% at $325 to $375.
Counsel's initial fee petition generally did not specify time devoted to specific activities. The only summaries were summaries of the time and lodestar for each attorney and law firm. This petition did not provide a sufficient basis for analyzing the request. See FMC Corp. v. Varonos, 892 F.2d 1308, 1316-17 (7th Cir.1990). The court ordered counsel to provide a breakdown of charges for the class certification motion, fairness hearing brief, and court appearances. Counsel submitted these items, but provided a separate submission from each law firm and some of the law firms divided it up by attorney. Nowhere were the amounts totalled. Nowhere is there one chronological submission so that it can be readily determined which activities were being performed at the same time by different attorneys. Not even the charges for appearances are organized by appearance date. No subtotals are provided as to certain types of activity, e.g., time spent on discovery related to the class certification motion. The court, however, has done some of this analysis, including reviewing the court file, the docket entries, and the time spent in court, and finds sufficient indication that the fee request is overstated. It is noted that counsel often listed multiple activities for a single time entry, which this court has sought to break down by activity. The presentation has imposed additional burdens on the court.
Plaintiffs moved for class certification. The opening brief and reply brief totalled less than 30 pages. Sixteen attorneys billed $58,591 for 281 hours of work on that brief.8 This amount includes $14,538 for 95 hours of conferring or otherwise communicating with cocounsel. Thus, over one-third of the time billed for the brief was for conferring with other attorneys. The court did not attempt to total up the amount billed for reviewing the work of other attorneys, but that is also a substantial portion of the hours billed. This shows that much of counsel's bill consists of unnecessary duplication of work brought about by having an excessive number of attorneys involved in the case. Although fervently opposed by defendants, class certification was not a difficult issue. It would be extremely unlikely that a stockholder action would not be certified. $30,000 is a more than adequate amount for the class certification briefs. That is about half of the amount claimed.
Plaintiffs submitted a 36-page memorandum in support of final settlement approval. While there is some legal analysis contained in the memorandum, it mostly consists of a factual presentation. Twelve attorneys billed $40,441 for 178 hours of work on that memorandum. This amount includes $12,997 for 57 hours of conferring with or otherwise communicating with cocounsel. Again, about one-third of the time is devoted to conferring with cocounsel. Substantial charges were also for reviewing the work of other attorneys. $20,000 is more than adequate compensation for the memorandum. Again, that is half of what counsel claims.
Counsel billed $24,406 for 99 hours of appearing in court for 26 status and motion calls. This amount includes preparation time as well. Counsel billed for the appearance of more than 2 attorneys on only one occasion and that status hearing concerned the question of consolidating the then-separate cases. New York counsel billed for four court appearances. Each time, New York counsel billed at least 9 hours for...
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Harman v. Lyphomed, Inc.
...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......
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Harman v. Lyphomed, Inc.
...two student interns--representing four Chicago, four New York and two Philadelphia law firms. The district court's decision of February 27, 1990, 734 F.Supp. 294, begins with four assumptions. The first is that the substantive reforms that took place at Lyphomed were the result of the FDA e......