Hill v. State St. Corp.
| Decision Date | 08 January 2015 |
| Docket Number | CIVIL ACTION NO. 09-12146-GAO |
| Parties | TIMOTHY W. HILL, et al., Plaintiffs, v. STATE STREET CORPORATION, et al., Defendants. |
| Court | U.S. District Court — District of Massachusetts |
O'TOOLE, D.J.
The magistrate judge to whom this matter was referred has filed a Report and Recommendation ("R&R") (dkt. no. 510) recommending that the lead plaintiffs' motion for final approval of the class action settlement and plan of allocation (dkt. no. 492) and co-lead counsel's motion for attorneys' fees and reimbursement of litigation expenses (dkt. no. 494) be granted. Settlement class members Charles F. Franz and Nita W. Franz have timely filed an objection to the R&R, and the lead plaintiffs have filed a reply to that objection.
The Franzes previously objected to final approval of the settlement and the proposed award of attorneys' fees. The magistrate judge acknowledged these objections in her R&R and described why she concluded that they should be overruled. (R&R at 20.) In their objection to the R&R, the Franzes object to the magistrate judge's conclusions regarding the sufficiency of the notice of settlement and her recommendation that the attorneys' fee award be approved.
The Franzes contend that notice was insufficient because a portion of the class did not receive notice until after October 6, 2014, the deadline established for filing objections to the proposed settlement. As the magistrate judge observed in her R&R, the inquiry in classproceedings is not whether each member of the class has actually received notice, but whether notice "is reasonably calculated to reach the absent class members." Reppert v. Marvin Lumber & Cedar Co., Inc., 359 F.3d 53, 56 (1st Cir. 2004) (internal quotation marks and citation omitted). Where a security is held in street name - as the Franz shares were held - notice of a class action settlement is commonly sent directly to the nominee brokerage firm, which is then charged with forwarding notice to the beneficial owners. See, e.g., Fidel v. Farley, 534 F.3d 508, 511 (6th Cir. 2008); DeJulius v. New Eng. Health Care Employees Pension Fund, 429 F.3d 935, 940 (10th Cir. 2005); Silber v. Mabon, 18 F.3d 1449, 1452 (9th Cir. 1994). Such notice distributions may satisfy the requirements of due process even where the firm fails to send timely notice to all beneficial holders. See Fidel, 534 F.3d at 514 (); Silber, 18 F.3d at 1452, 1454 ().
Here, notice was sent to every record holder of State Street stock by August 18, 2014. (Thurin Decl. ¶ 3 (dkt. no. 504).) The notice directed the nominees to provide contact information of beneficial owners to the Class Administrator within 10 days of receipt, although the median response time was ultimately 22 days. (Id. ¶¶ 3, 6). By the October 6 deadline, approximately 80% of the Notice Packets had been mailed. (Id. ¶ 7.) As of October 15, still more than five weeks before the final approval hearing, approximately 98% of the notice packets were mailed. (Id. ¶ 8). As the notice plan allowed a substantial majority of the class to receive notice well in advance of the final approval hearing, it was sufficient under Rule 23 and relevant due process requirements.
The Franzes also contend that the content of the notice was inadequate as it did not inform class members of the exact settlement amount for each member or further costs to be incurred. But the objectors point to no case law to support their contention that this level of detail is required. The notice - which included a description of the action and the class, the aggregate settlement payment, a statement of the attorneys' fees and expenses to be sought, and reasons for the settlement, among other things - fully comported with the notice requirements of Rule 23(C)(2) and the Private Securities Litigation Act, 15 U.S.C. § 77z-1(a)(7), 78u-4(a)(7). (Notice (dkt. no. 499-3).)
Lastly, the Franzes object to the magistrate judge's recommendation for approval of the award of attorneys' fees, contending that the proposed fees are excessive and that the parties' stipulation of settlement contains an improper "clear sailing" agreement. However, the provision at issue - in which the defendants agree that they will not take a position on attorneys' fees - is not a "clear sailing" agreement, which occurs where the paying party "agrees not to contest the amount to be awarded by the fee-setting court so long as the award falls beneath a negotiated ceiling." Weinberger v. Great N. Nekoosa Corp., 925 F.2d 518, 520 n.1 (1st Cir. 1991). As the magistrate judge explained, there is no negotiated ceiling here. Moreover, "clear-sailing clauses are found mainly in cases . . . in which the value of the settlement to the class members is uncertain because it is not a cash settlement." Redman v. RadioShack Corp., 768 F.3d 622, 637 (7th Cir. 2014). In such instances, there is a concern that a defendant may negotiate higher fees at the expense of the class. Weinberger, 925 F.3d at 524 (). That is not the case here, where the attorneys' fees will be paid as a portion of a common fund settlement.
As to the amount of the attorneys' fees themselves, the magistrate judge recommended approving an award that amounts to 17% of the Settlement Fund plus interest, or $10,200,000 plus interest. I agree with her analysis and conclusion that this figure is reasonable. This action involved complex legal and factual issues and required years of active litigation, eventually yielding a $60 million settlement. Similarly, the 17% fee is well within the typical range of fees in such actions. See In re Neurontin Mktg & Sales Practice Litig., No. 04-cv-10981-PBS, 2014 WL 5810625, at *3 (D. Mass. Nov. 10, 2014) ().
Having reviewed the relevant pleadings and submissions, the R&R, and the objection to it, I approve and ADOPT the magistrate judge's recommendation in its entirety.
Accordingly, the Motion (dkt. no. 492) for Settlement and Motion (dkt. no. 494) for Attorneys' Fees and Expenses are both GRANTED.
It is SO ORDERED.
/s/ George A. O'Toole, Jr.
IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS
THIS DOCUMENT RELATES TO THE SECURITIES ACTION
This consolidated securities class action asserts claims on behalf of all persons and entities who purchased publicly traded common stock of State Street Corporation ("State Street") during the period from October 17, 2006 through October 21, 2009, inclusive (the "Settlement Class Period"), including those who purchased pursuant or traceable to State Street's June 3, 2008 secondary offering, and who were damaged thereby. Lead Plaintiffs' Consolidated Amended Class Action Complaint filed on July 29, 2010 (Docket No. 51) (the "Complaint") asserts claims for violations of federal securities laws against defendants (i) State Street; (ii) Ronald E. Logue, Edward J. Resch, Pamela D. Gormley, Kennett F. Burnes, Peter Coym, Nader F. Darehshori, Amelia C. Fawcett, David P. Gruber, Linda A. Hill, Charles R. LaMantia, Maureen J. Miskovic, Richard P. Sergei, Ronald L. Skates, Gregory L. Summe, and Robert E.Weissman (the "Individual Defendants"); (iii) Goldman, Sachs & Co., Morgan Stanley & Co. LLC (formerly known as Morgan Stanley & Co. Incorporated), Credit Suisse Securities (USA) LLC, and UBS Securities LLC (the "Underwriter Defendants"); and (iv) Ernst & Young LLP ("Ernst & Young") (collectively, "Defendants").
On July 8, 2014, Lead Plaintiffs and Defendants entered into a Stipulation of Agreement of Settlement (Docket No. 478-1) (the "Stipulation"), which provides for dismissal of the Action and the release of claims against all Defendants in return for a settlement payment of $60,000,000 (the "Settlement"). Lead Plaintiffs moved for preliminary approval of the Settlement. On July 20, 2014, the District Judge entered an order referring this motion and all other matters relating to the Settlement to this court. On July 21, 2014, this court entered the Order Preliminarily Approving Proposed Settlement and Providing for Notice (Docket No. 488) (the "Preliminary Approval Order"), which preliminarily approved the Settlement, certified the Settlement Class, approved the method of disseminating notice to the Settlement Class, and scheduled a Settlement Hearing for consideration of final approval of the Settlement and related matters.
The matter is presently before this court on Lead Plaintiffs' Motion for Final Approval of Class Action Settlement and Plan of Allocation (Docket No. 492) and Co-Lead Counsel's Motion for an Award of Attorneys' Fees and Reimbursement of Litigation Expenses (Docket Nos. 494). This court has reviewed and considered the Stipulation and all papers filed in connection with the motions, including two objections submitted, and a hearing was held on the motions on November 20, 2014. For all the reasons detailed herein, this court recommends to the District Judge to whom this case is assigned that both motions be ALLOWED, that the Parties' proposed Final Judgment Approving Class Action Settlement and of...
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