8 UNITED STATES DISTRICT COURT - Rust Consulting · PDF file · 2004-08-23CLASS...

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UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

(OAKLAND DIVISION)

FATEMAH AZIZIAN, et al.

Plaintiffs,

vs.

FEDERATED DEPARTMENT STORES, INC., et al.

Defendants.

) ) ) ) ) ) ) ) ) ) )

Civil No. 3:03 CV-03359 SBA CLASS ACTION REPORT AND RECOMMENDATION BY THE SPECIAL MASTER ON AWARD OF ATTORNEYS’ FEES AND COSTS TO CLASS COUNSEL

REPORT AND RECOMMENDATION BY THE SPECIAL MASTER ON AWARD OF ATTORNEYS’ FEES AND COSTS TO CLASS COUNSEL

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TABLE OF CONTENTS

I. RECOMMENDED FINDINGS OF FACT RELATING TO THE APPLICATION FOR ATTORNEYS’ FEES AND EXPENSES. ........................................................................... 3

A. History Of The Case. ...............................................................................................3

B. Settlement Terms.....................................................................................................8

C. Further Information On Products To Be Distributed. ...........................................11

II. RECOMMENDED CONCLUSIONS OF LAW CONCERNING AN AWARD OF ATTORNEYS’ FEES AND COSTS TO CLASS COUNSEL. ......................................... 13

A. Applicable Legal Standards...................................................................................13

B. An Award Of 13.7% Of The Common Fund Is Reasonable And Fair..................16

C. The Result Under A Percentage-Of-The-Fund Approach Is Confirmed By A Lodestar Cross-Check. ..........................................................................................23

D. The Expenses Sought Are Also Reasonable. ........................................................24

III. CONCLUSION. ................................................................................................................. 25


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On November 21, 2003, the Honorable Saundra B. Armstrong, the presiding

judge in this case, preliminarily approved the settlement herein. Subsequently, on May 21,

2004, as revised by a stipulated order dated June 17, 2004, Judge Armstrong ordered,

pursuant to Fed. R. Civ. P. 23(h)(4), 53(c) and 54(d)(2)(D), that the undersigned serve as a

Special Master and make a report and recommendations on the issues of: (1) final approval of

the settlement and plan of distribution proposed by plaintiffs Fatemah Azizian, Soraya Farrah,

Eunice Fey, Rose Gonzales, Kazuko Y. Morgan, Nicola Nelson-Torres, Judith Pogran,

Shirley Powell, Monique Patrick, Pamela Powell and Rose Skillman (the “Class Plaintiffs” or

“plaintiffs”) and defendants; (2) an award of fees and costs to Class Counsel1 in this case; and

(3) implementation of the proposed settlement. “Stipulation and Order of Reference to the

Honorable Charles B. Renfrew, Special Master,” (May 21, 2004) (“Order of Reference”).

Only the second of these items is dealt with in this report and recommendation. The first and

third will be dealt with in the separate Reports and Recommendations by the Special Master

on: (1) Final Approval of Class Settlement and Plan of Distribution and (2) Planned

Implementation of the Proposed Settlement.”

Various objectors to the settlement and the petition for attorneys’ fees

challenged the original Order of Reference, including the provisions therein that allowed the

Special Master to impose the fees for his services on objectors in whole or in part and that

permitted the Court to review findings of fact issued by the Special Master under a “clear

error” standard of review. On June 17, 2004, the Court entered a stipulated order revising the

May 21 order of reference by: (1) deleting the provision for such “clear error” review;

(2) providing that the Special Master’s fees shall be paid one-half by the plaintiffs and one-

1 As used herein, the term “Class Counsel” refers to the following law firms: Saveri & Saveri, Inc.; Lieff, Cabraser, Heimann & Bernstein, LLP; the Law Offices of Joseph M. Alioto; the Law Offices of Francis O. Scarpulla; Cooper & Kirkham, P.C.; Zelle Hofmann Voelbel Mason & Gette LLP; The Furth Firm LLP; the Law Offices of John H. Boone; the Law Offices of John L. Burris; the David Danis Law Firm, PC; Bramson Plutzik Mahler & Birkhaeuser LLP; Kendrick & Nutley; Gross & Belsky LLP; Milberg, Weiss, Bershad, Hynes & Lerach LLP; The Mogin Law Firm; the Law Offices of Gretchen M. Nelson; Critchlow & Diskint; the Law Offices of John W. Allured; and Hanssen, Malloy, Needham, Morrison, Reinholtsen & Crowley LLP.


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half by the defendants; and (3) providing that the Special Master shall only have the authority

to impose or recommend sanctions that is permitted under Fed. R. Civ. P. 53(c). In all other

respects, the Order of Reference was reconfirmed. “Revisions To Order of Reference To the

Honorable Charles B. Renfrew,” ¶¶1-2 (June 17, 2004) (“Revisions Order”).

The Special Master examined all the initial filings made in support of final

approval of the settlement and the petition for attorneys’ fees and costs. The Special Master

also presided over a hearing held on June 1, 2004 at which oral argument on these matters

was heard, and evidence was taken, pursuant to Fed. R. Civ. P. 53(d).

As a result of that hearing the Special Master recommended that additional

submissions be made, pursuant to a schedule that was approved by the Court. “Report and

Recommendation of The Honorable Charles B. Renfrew, Special Master, Re Further

Proceedings For Hearing Objections To Settlement And To An Award of Attorneys’ Fees

And Litigation Expenses” (June 29, 2004). On June 16, 2004, defendants submitted

declarations describing the products that would be distributed to class members pursuant to

the terms of the proposed settlement.

On June 30, the objectors were to submit briefs responding to both these

declarations and evidence submitted at the hearing, as well as proposed findings of fact and

conclusions of law. The following pleadings were received: (1) the “Memorandum Brief and

Amendment to Objection of Patricia A. Corbin, Lisa M. Rice and Wendy Bullock” (June 21,

2004) (“Corbin Br.,”); (2) the “Supplemental Objection of Hannah Feldman to Proposed

Class Action Settlement and Fee Petition of Class Counsel” (June 28, 2004) (“Feldman Br.”)

and an accompanying “[Proposed] Recommendation on Objections of Special Master Charles

B. Renfrew”; (3) the “Supplemental Objection of Susan Casenza and Valerie Theng Matherne

to Proposed Class Action Settlement and Federated Department Stores, Fee Petition of Class

Counsel” (June 30, 2004) (“Casenza-Matherne Supp. Obj.”);2 (4) the “Coordinated Objectors’

2 The filing by Ms. Casenza and Ms. Matherne incorporates by reference the objections filed by Jane Curtman-Schroeder. Casenza-Matherne Supp. Obj., p. 2.


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Supplemental Objections To Proposed Settlement and Appointment of Special Master” (June

30, 2004) (“Coord. Obj. Br.”)3 and the accompanying “[Proposed] Report of Special Master

Charles B. Renfrew As To Settlement Objections”; and (5) the undated “Objecting States

Brief in Support of Proposed Report and Recommendation” (“States’ Br.”), which was

accompanied by the “Proposed Report and Recommendation of the Objecting States.”4 No

one else responded by the June 30 deadline.

On July 21, plaintiffs and defendants submitted responses to these objections

and their own proposed findings of fact and conclusions of law. The Special Master has

considered all of the foregoing in reaching this report and recommendation.

Pursuant to Rule 53(f) and (g)(3)-(4) and the Order of Reference (as amended),

the Special Master hereby makes the following Report and Recommendation in the form of

findings of fact and conclusions of law.5

I. RECOMMENDED FINDINGS OF FACT RELATING TO THE

APPLICATION FOR ATTORNEYS’ FEES AND EXPENSES.

A. History Of The Case.

1. In 1998, plaintiffs filed a number of class action complaints on behalf of

persons who purchased Department Store Cosmetics Products (“DSCPs”)6 in California. The

original complaints were filed in various California Superior Courts and were ultimately

coordinated and assigned by the Judicial Council to the Honorable M. Lynn Duryee, Judge of

3 The Coordinated Objectors are: Robby G. Fletcher, Aaron Jordan, Sharon A. Harris, Brenda Matthews, Mary Swift, Jennifer R. Hill, Jeanine M. Schewenberg, Jane Curtman-Schroeder, Hannah Feldman, Wendy Bullock, Tamara Mixon, Patricia Corbins, Susan Casenza, Valerie Theng Matherne, Lisa M. Rice, and Grace Wright. These individuals will be referred to collectively herein as the “Coordinated Objectors”. 4 The States’ Brief may have been filed late, but the Special Master has considered it. 5 The Coordinated Objectors challenged the ability of the Special Master to serve in this matter. That challenge is dealt with in the Special Master’s separate Report and Recommendation on final approval of the proposed settlement. 6 DSCPs are defined in paragraph 2 of the settlement agreement as high-end, prestige or specialty beauty and cosmetic products and product lines (including color products, treatment and fragrances) sold by the Manufacturer Defendants under various brand names from May 29, 1994 through July 16, 2003. These products are sold primarily through traditional department and/or specialty stores and not through mass distribution channels.


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the Superior Court in and for the County of Marin. “Declaration of Francis O. Scarpulla,”

¶¶26-27 (May 13, 2004) (“Scarpulla Decl.”); Tr. at 14-15. Plaintiffs’ claims arose under Cal.

Bus. & Prof. Code §16720 and Cal. Bus. & Prof. Code §17200. Plaintiffs alleged that certain

Department Store Defendants7 engaged in anti-competitive practices that discouraged the

discounting of DSCPs in the United States. The nature of the alleged anti-competitive

product is important to this case. As counsel for plaintiffs made clear at the June 1 hearing,

plaintiffs were not alleging a typical horizontal price-fixing case where damages could be

calculated by applying some flat overcharge percentage to all sales of the products in

question. Tr. at 227. Instead, plaintiffs were alleging an agreement not to discount, where

“you’re only talking about a very small fraction of total sales, because people in retail don’t

discount something they can sell at full price.” Id. As a result, plaintiffs alleged that affected

consumers paid more for the subset of DSCPs that they contended would normally be subject

to such discounting than they would have paid absent the alleged anticompetitive conduct.

After extensive discovery, Class Plaintiffs, on May 17, 2000, filed their Amended

Consolidated Complaint, adding certain Manufacturer Defendants;8 they alleged pervasive

joint practices of the Department Store Defendants and the Manufacturer Defendants to

discourage discounting of DSCPs. Id., ¶47.

2. Plaintiffs continued conducting extensive discovery; in total, 27

depositions of defendants’ or third parties’ personnel were taken, 955 separate interrogatories

were served, 832 document demands were served, 303 requests for admission were served, 11

depositions of class representatives were defended, and defendants collectively produced

millions of pages of documents, all of which were reviewed and 554,445 pages of which were

coded by Uniscribe Corporation (“Uniscribe”), a document management consultant, at a cost

7 Federated Department Stores, Inc., The Neiman-Marcus Group, Inc., Nordstrom, Inc., The May Department Stores Company, Saks Incorporated, Gottschalks Inc., Target Corporation, and Dillard’s, Inc. 8 The Estée Lauder Companies Inc., L’Oréal USA, Inc., Conopco, Inc., Christian Dior Perfumes, Inc., Guerlain, Inc., Parfums Givenchy, Inc., Chanel, Inc., Boucheron (USA) Ltd., and Clarins U.S.A., Inc.


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of $370,927.99. Scarpulla Decl., ¶¶32, 39, 44 & Exh. 2. These document reviews involved

teams of attorneys and paralegals who visited defendants’ sites across the country. Id., ¶38.

Once the preliminary coding was completed by Uniscribe, plaintiffs’ counsel had attorneys

and paralegals conduct subjective coding of 194,057 documents, which were included in an

electronic database. Id., ¶39. This task involved numerous attorneys and paralegals. Id., ¶40.

Plaintiffs organized key documents by subject matter category, and compiled documents

relating to more than 60 potential deponents. Id., ¶42. The parties retained the services of the

undersigned to act as a Special Master and Discovery Referee to resolve the numerous and

contested discovery issues that arose during the lengthy proceedings. Id., ¶¶33-35, 50. See

“Declaration of Fredric Yerman,” ¶15 (May 13, 2004) (“Yerman Decl.”). Plaintiffs also

retained an economic expert. Scarpulla Decl., ¶¶57-58.

3. On January 5, 2001, Judge Duryee ordered the parties to mediation, and

they retained the services of former Judge Weinstein and Catherine Yanni of JAMS to

mediate settlement negotiations. Id., ¶¶54-56. See “Declaration of Catherine Yanni,” ¶¶2-4

(May 13, 2004) (“Yanni Decl.”).

4. As a review of their separate briefs submitted in support of the settlement

attests, Defendants have persistently denied engaging in any wrongful conduct and have

vigorously defended this case. This point was emphasized by counsel for the defendants at

the June 1 hearing. Tr. at 18-19. Two motions for summary judgment were pending before

Judge Duryee at the time this settlement was consummated. Scarpulla Decl., ¶55.

5. As noted above, the original cases filed in the state courts alleged a

statewide conspiracy in California. Defendants’ operate nationwide businesses and their

conduct was nationwide in scope; a nationwide settlement was thus necessary to resolve all

applicable federal and state law claims and to reduce the time and expense that would

otherwise result from multiple litigation in federal and state for a of claims that are

substantively similar to the claims asserted herein. Consequently, to obtain a nationwide

settlement and relief, a federal complaint was filed in the Northern District of California on

July 18, 2003.


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6. Class Counsel promptly sought preliminary approval of their proposed

settlement, which Judge Armstrong granted on November 21, 2003. The proposed Settlement

Class (“Class”) sought to be certified is as follows:

All persons who currently reside in the United States and who purchased Department Store Cosmetic Products in the United States, which products were manufactured, distributed and/or sold by the Manufacturer Defendants or Department Store Defendants, at any time during the period May 29, 1994 through July 16, 2003 (the ‘Class Period’). Excluded from this Settlement Class are all employees, officers, directors or agents (including attorneys) of any defendants, as well as any judge, justice or judicial officer presiding over this matter, and each such person’s immediate family.

7. Nationwide notice was disseminated to putative Class members. See

Yerman Decl., ¶13. The published notice program was described by Katherine Kinsella of

Kinsella/Novak Communications, Ltd., who has developed and directed the notices in over

200 complex litigations. “Declaration of Katherine Kinsella,” ¶4 (May 13, 2004). She

explained that she used consumer demographic data to determine the media habits of putative

class members, so that the most effective notice program could be designed. Id., ¶¶8-11. A

“target demographic” of adults eighteen years or older who purchased cosmetics at

department stores within the last six months was identified. Id., ¶13. Based on statistical data

obtained from Simmons Market Research Bureau, Inc., Media Mark Research, Inc., Nielsen

Media Research, Inc. and Arbitron, it was concluded that this target group, which consisted

primarily of well-educated, middle to upper income women, would be likely to be readers of

magazines and newspapers. Id., ¶¶14-16. Print advertisements about the proposed settlement

were therefore placed in: (1) 54 daily newspapers covering the top 25 media markets in the

United States as of February 1, 2004; (2) national magazines (Newsweek, Better Homes &

Gardens, Cosmopolitan, In Style, People, Reader’s Digest, TV Guide, Woman’s Day); and

(3) newspaper supplements in 925 newspapers reaching every single major media market in

the country. Id., ¶¶17-22. These notices reached 91.3% of cosmetics purchasers with an

average exposure frequency of 4.4 times. Id., ¶25. Ms. Kinsella stated that the costs of this

program totaled $2,205,837.71. “Declaration of Katherine Kinsella,” ¶10 (May 28, 2004). A


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second notice, which would be disseminated shortly before the distribution of the settlement

product is estimated to cost another $460,000 more. Id., ¶11.

8. Notice was also disseminated through an internet website,

<http://www.cosmeticssettlement.com>. This effort was described in declarations submitted

by James White, a Senior Vice-President of Rust Consulting, Inc. (“Rust”) and Kim R.

Schmidt of Rust. Rust has provided notification and/or claims administration services in

more than 500 class actions. “Declaration of James G. White,” ¶4 (May 12, 2004) (“First

White Decl.”). This website provided general information about the settlement (including

notices and pleadings) and permitted visitors to request an e-mail or postcard notification of

the time and place of the product distribution contemplated by the settlement. As of July 18,

2004, 721,125 visitors had been to this website (according to the counter installed there), and

280,622 requests for e-mail notification and 230,920 requests for mailed notification had been

received. Rust also established and maintained a toll-free telephone number (1-877-604-

5776) to enable putative class members to request either a copy of the notice or a postcard

notification of the product distribution. As of July 18, 2004, there were 149,474 calls to this

number and 107,186 requests for mailed notice. A separate toll-free number (1-877-657-

9155) was maintained by Rust to process requests by callers to receive the long form of the

class notice. In total, as of July 18, 2004, there have been 870,599 visitors to the website or

users of the toll-free numbers. As of the same date, there have been 618,728 requests for

mailed or e-mailed notice of the distribution of the Product Fund. “Declaration of Kim R.

Schmidt,” ¶¶8-11 (July 19, 2004); First White Decl., ¶13. Rust has spent a total of

$137,133.51 on these efforts through April 30, 2004 and estimates it will expend another

$124,645.56 on them through December of 2004. “Declaration of James G. White,” ¶¶8-12

(May 28, 2004).

9. Only 61 persons purported to opt out of the class; of these, one was a

duplicate, a second (that of J. Thayer) was untimely, and a third (that of N. Young) was later

withdrawn. First White Decl., ¶10 & Exh. C. Only 26 unique objections made on behalf of a

total of 73 persons were submitted to the Court, thus indicating that the overwhelming


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majority of Class members support the settlement.9 Id., ¶9 & Exh. B. An “objection” by the

A.G.s of 11 states was also submitted; however, in their initial submission, they did not

appear to challenge the adequacy of the settlement, but instead recommended that more

information be sought concerning it and requested the appointment of a Special Master to

monitor the settlement, which was promptly done.10

B. Settlement Terms.

10. The settlement agreement provides that Settling Defendants shall agree to

entry of the Stipulated Order attached to the agreement. See Scarpulla Decl., ¶¶62-70. This

order provides, among other things, that the Department Store Defendants are prohibited from

entering into any agreement with any manufacturer to: (a) fix, establish, control or maintain

the resale price, including the manufacturer’s suggested resale price (“MSRP”), at which any

Department Store Defendant may offer for sale or sell any DSCPs; (b) maintain, adopt or

adhere to any resale price for such products; (c) secure any commitment or assurance from

any other Department Store Defendant concerning the resale price at which that defendant

may offer for sale or sell any DSCPs; or (d) prohibit any Department Store Defendant from

advertising any Manufacturer Defendant’s DSCPs at a resale price less than the MSRP,

except any advertising done pursuant to a cooperative advertising program whereby a

9 This count includes multiple objections by the same persons and the objection of J. Thayer, which the Special Master concludes was not filed in a timely manner. See First White Decl., ¶8. 10 It is of interest that the Attorney General of the state of California did not join in this “objection.” It was the action taken by the California attorney General in 1995 which caught the attention of plaintiffs’ counsel and precipitated this action. In 1995 Broadway Stores provided its customers with a $25 gift certificate for every $250 of cosmetics purchased, in effect a 10% discount. The discount was called the Club West Program. Competing department stores complained to certain cosmetic manufacturers about the discount of the manufacturers’ suggested retail price. When the complaints were made public, the Attorney General’s Office wrote to certain cosmetic manufacturers cautioning them against taking action against Broadway Stores’ discount program. Apparently, the Attorney General’s Office felt that Broadway stores would not be coerced into dropping the Club West Program. However, that program was discontinued when Broadway Stores was acquired by one of the Defendant stores. While no conclusions may be drawn from the absence of the Californian Attorney General, it is worth noting.


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manufacturer pays the costs, in whole or in part, of advertising by a retail store for the

manufacturer’s DSCPs (“Cooperative Advertising Program”).

11. The Stipulated Order also provides that the Manufacturer Defendants are

prohibited from entering into any agreement with any retail store: (a) to fix, establish, control

or maintain the resale price, including any MSRP, at which any Department Store Defendant

may offer for sale or sell any DSCPs; (b) to maintain, adopt or adhere to any resale price for

any Manufacturer Defendant’s DSCPs; (c) to secure any commitment or assurance from any

Department Store Defendant concerning the resale price at which such Department Store

Defendant may offer for sale or sell any DSCPs; or (d) to prohibit any Department Store

Defendant from advertising any Manufacturer Defendant’s DSCPs at a resale price less than

the MSRP, or to prohibit any other Department Store Defendant from advertising any

Manufacturer Defendant’s DSCPs at a resale price less than the MSRP, except any

advertising done pursuant to a Cooperative Advertising Program.

12. Each Manufacturer Defendant is also prohibited from: (a) suggesting or

recommending an MSRP or resale price to any Department Store Defendant in writing on any

price list or order form unless the following caveat appears on each page of such list or form:

“The Retail Prices Quoted Herein Are Suggested Only. You Are Completely Free to

Determine Your Own Retail Prices”; (b) requiring any Department Store Defendant to report

the identity of any other Department Store Defendant which resells that Manufacturer

Defendant’s DSCPs below the MSRP; (c) taking objectively baseless action under applicable

legal precedent to hinder or preclude the lawful use by any Department Store Defendant of

any brand name, trade name or trademark of any Manufacturer Defendant because of the sale

or advertising of any DSCPs at any resale price; (d) conducting any surveillance program to

determine whether any Department Store Defendant is advertising, offering for sale or selling

any DSCPs at any resale price, where such surveillance program is conducted to fix, maintain,

control or enforce the resale price at which any DSCPs are sold or advertised; (e) making any

payment or granting any other benefit to any Department Store Defendant in consideration for

the Department Store Defendant’s agreement to sell or advertise any DSCPs at MSRP, except


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in connection with any Cooperative Advertising program or any conduct, agreement or

understanding that is expressly permitted under the Stipulated Order; or (f) agreeing upon the

prices for new DSCPs with any other Manufacturer Defendant.

13. The Stipulated Order also requires each Manufacturer Defendant to

distribute a letter (attached as Exhibit A to the Stipulated Order) to all of the retailers that sell

that Manufacturer Defendant’s DSCPs, which advises those retailers of the prohibitions

contained in the Stipulated Order.

14. The settlement further requires that the Defendants provide a total of

$175,000,000 in DSCPs for distribution (the “Product Fund”), based on the retail value of

such products as they would be normally valued by the Settling Defendants in the ordinary

course of business, free of any cost or charge to, or requirement to purchase any other product

or service by, the members of the Settlement Class. This Product Fund is to be distributed in

accordance with procedures described in Exhibit C to the settlement agreement.

15. In addition to the foregoing benefits, the Settling Defendants agreed to pay

all expenses and costs incurred in providing notice to the Class, as described in paragraph 9 of

the settlement agreement, as well as all expenses incurred in administering the notice and

settlement process. The Settling Defendants also agreed not to object to any application by

Plaintiffs’ Counsel for attorneys’ fees, expenses and costs incurred for work already

performed in the prosecution of these actions or to be performed hereafter by Plaintiffs’

Counsel (as defined in the settlement agreement) on behalf of the Class in obtaining final

approval of this settlement and in upholding such approval on appeal, so long as, and

provided that, such request is not in excess of $24,000,000.

16. As provided in the settlement agreement, the settlement becomes final

upon: (a) the entry of the order and final judgment of dismissal with prejudice as to the

Settling Defendants against all Plaintiffs and members of the Class who have not timely

excluded themselves from this Action; and (b) expiration of the time for appeal of the

approval or, if an appeal is taken, the affirmance of the judgment with no further possibility of

appeal.


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C. Further Information On Products To Be Distributed.

17. The DSCPs to be distributed pursuant to the Settlement Agreement are not

identified in the agreement itself. At the hearing held on June 1, 2004, the Special Master

asked for such an identification, and attorneys for each defendant explained in detail what

products were contemplated for distribution and displayed physical examples of such products

and their packaging. Tr. at 138-51.

18. These products were further identified in a series of declarations submitted

by employees of defendants. “Declaration of Dalia Chammas,” ¶¶5-7 (June 11, 2004)

(“Chammas Decl.”) (for L’Oréal); “Declaration of Adam Frank,” ¶3 (June 11, 2004) (“Frank

Decl.”) (for Boucheron); “Declaration of Michael F. Murphy,” ¶¶2-4 (June 10, 2004

(“Murphy Decl.”) (for Chanel); “Declaration of Christian Dior Perfumes, Inc.

Representative,” ¶2 (June 10, 2004) (“CDP Decl.”); “Declaration of Parfums Givenchy, Inc.

Representative,” ¶2 (June 10, 2004) (“PGI Decl.”); “Declaration of Guerlain, Inc.

Representative,” ¶2 (June 10, 2004) (“Guerlain Decl.”); “Supplemental Declaration of Jean-

Marc Plisson,” ¶2 (June 14, 2004) (“Supp. Plisson Decl.”) (for Christian Dior Perfumes,

Guerlain and Givenchy); “Declaration of Marc S. Rosenblum,” ¶¶3-6 (June 10, 2004)

(“Rosenblum Decl.”) (for Clarins); “Declaration of Louis A. Schapiro,” ¶¶5-6 (June 11, 2004)

(“Schapiro Decl.”) (for Estée Lauder); “Declaration of Anthony T. Sciortino,” ¶¶4-6 (June 14,

2004 (“Sciortino Decl.”) (for Conopco); and “Declaration of John P. Wiswall, ¶¶5-7 (June 10,

2004) (“Wiswall Decl.”) (for L’Oréal). While none of these declarants could state with

certainty that the products displayed will be distributed at the time of distribution (given the

inherent uncertainty as to when the settlement will become final), all of them detailed what

their respective companies currently intend to distribute. The descriptions and estimated retail

values of these products are set forth in Table 1.


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Table 1 Descriptions of Products (And Estimated Retail Value Thereof) That Defendants Currently

Intend To Distribute As Part Of The Proposed Settlement 1. L’Oréal Four different sets of Lancôme products that include a 0.5 oz. jar of

moisturizer and a 0.25 oz. jar of eye cream. The four sets will include either: (a) Primo Optimum Cream and Primo Optimum eye; (b) Renergie Intense Lift and Renergie Eye; (c) Resolution Cream and Resolution Eye; or (d) Absolue Cream and Absolue Eye. Each of these sets of products retails for at least $25.

2. L’Oréal Designer Fragrances Division

Four sets of products for men that include either: (a) a 5 ml. bottle of Giorgio Armani Acqua di Gio Homme cologne

and a 50 ml. bottle of Giorgio Armani Acqua di Gio Homme aftershave balm;

(b) a 7 ml. bottle of Ralph Lauren Romance cologne and a 50 ml. bottle of Ralph Lauren Romance body lotion;

(c) a 7 ml. bottle of Ralph Lauren Blue cologne and a 50 ml. bottle of Ralph Lauren Blue body lotion; or

(d) a 5 ml. bottle of Ralph Lauren Blue cologne and a 50 ml. bottle of Ralph Lauren Blue aftershave balm.

Each of these sets has a retail value of at least $25. 3. Boucheron A 1/2 oz. bottle of Boucheron perfume (e.g., Initial) or possibly a

smaller amount of fragrance coupled with a lotion. These products will have a retail value of at least $25.

4. Chanel (1) A regular-sized lip product that will be either Precision Lip Define, Infrarouge Whisperlight Lipstick, Glossimer, or Aqua Crayon Lipcolour Stick ($23.50-$26) or (2) a 1.75 oz. scented body lotion from the Coco Mademoiselle line ($25).

5. Esteé Lauder A choice of one Clinique or one Estée Lauder product. The Clinique product will likely be a 1 oz. jar of Moisture Surge Extra worth $18 at retail. The Estée Lauder product has not been chosen, but will be of equal attractiveness to the Clinique product and will retail for between $18 and $25.


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6. Conopco A package of two products consisting, for example, of selections from the following Calvin Klein products: (a) .19 oz. powder blush with applicator brush ($23); (b) .12 oz. lip color full coverage lipstick ($16); (c) 1 fl. oz. face color wash ($23); (d) .03 oz. velvety eye pencil eye define with foam tip smudger

($14); (e) .21 oz. lip gloss ($17); (f) .35 oz. pressed powder with applicator pad ($26); (g) .35 oz. bronzing powder ($23); (h) .08 oz. lip color wash lipstick ($15); (i) .08 oz. iridescent eye shadow ($15); (j) .33 fl. oz. eye gloss ($14); or (k) .33 fl. oz. eye color wash ($14).

7. Christian Dior Perfumes

15 ml. or 20 ml. J’Adore perfume in signature glass bottle, with a retail value of at least $25.

8. Guerlain 15 ml. or 20 ml. Shalimar perfume in signature glass bottle, with a retail value of at least $25.

9. Givenchy 15 ml. or 20 ml. Amirage D’Amour perfume in signature glass bottle, with a retail value of at least $25.

10. Clarins A choice of two facial moisturizers: (a) 30 ml. Clarins Moisture Quenching Hydra-Balance Lotion

($31.20); or (b) 30 ml. Clarins Energizing Morning Cream ($33.30).

II. RECOMMENDED CONCLUSIONS OF LAW CONCERNING AN

AWARD OF ATTORNEYS’ FEES AND COSTS TO CLASS

COUNSEL.

A. Applicable Legal Standards.

1. Counsel who represent a class and produce a benefit for the class members

are entitled to be compensated for their services. As stated by the United States Supreme

Court, “this Court has recognized consistently that a litigant or a lawyer who recovers a

common fund for the benefit of persons other than himself or his client is entitled to a

reasonable attorney’s fee from the fund as a whole.” Boeing Co. v. Van Gemert, 444 U.S.

472, 478 (1980) (“Boeing”). See also Mills v. Elec. Auto-Lite Co., 396 U.S. 375, 393 (1970)


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(“Mills”); Central R.R. & Banking Co. v. Pettus, 113 U.S. 116, 123 (1885) (“Central R.R.”).

In Blum v. Stenson, 465 U.S. 886, 900 n.16 (1984) (“Blum”), the Supreme Court recognized

that under the “common fund doctrine” a reasonable fee may be based “on a percentage of the

fund bestowed on the class.” The purpose of this doctrine is that “those who benefit from the

creation of the fund should share the wealth with the lawyers whose skill and effort helped

create it.” In re Washington Public Power Supply System Sec. Litig., 19 F.3d 1291, 1300 (9th

Cir. 1994) (“WPPSS”). This rule, known as the “common fund doctrine,” is firmly rooted in

American case law. See, e.g., Internal Imp. Fund Trustees v. Greenough, 105 U.S. 527

(1881).

2. The Supreme Court repeatedly has recognized the importance of private

antitrust litigation, as a necessary and desirable tool to assure the effective enforcement of the

antitrust laws. See, e.g., Pillsbury Co. v. Conboy, 459 U.S. 248, 262-63 (1983); Reiter v.

Sonotone Corp., 442 U.S. 330, 331 (1979); State of Hawaii v. Standard Oil Co., 405 U.S.

251, 266 (1972); Perma Life Mufflers, Inc. v. International Parts Corp., 392 U.S. 134, 139

(1968). Substantial fee awards in successful cases, encourage meritorious class actions, and

thereby promote private enforcement of, and compliance with, the antitrust laws. As noted by

the Second Circuit in Alpine Pharmacy. Inc. v. Chas. Pfizer & Co., Inc., 481 F.2d 1045, 1050

(2d Cir.), cert. denied, 414 U.S. 1092 (1973), “[i]n the absence of adequate attorneys’ fee

awards, many antitrust actions would not be commenced. ...”

3. The amount of the award of attorneys’ fees and expenses is within the

discretion of the district court and will only be set aside upon a showing that the action

amounted to an abuse of discretion. Hanlon v. Chrysler Corporation, 150 F.3d 1011, 1029

(9th Cir. 1998); WPPSS, 19 F.3d at 1296. In the Ninth Circuit, the district court has discretion

in a common fund case to choose either the “percentage-of-the-fund” or the “lodestar” method

in calculating fees. Fischel v. Equitable Life Assur. Soc’y, 307 F.3d 997, 1006 (9th Cir. 2002)

(“Fischel”); Wininger v. SI Management L.P., 301 F.3d 1115, 1123-24 & n.9 (9th Cir. 2002);

Vizcaino v. Microsoft Corp., 290 F.3d 1043, 1047 (9th Cir.), cert. denied sub nom. Vizcaino v.

Waite, 537 U.S. 1018 (2002) (“Vizcaino”); WPPSS, 19 F.3d at 1296.


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4. The lodestar approach is used more often in “employment, civil rights and

other injunctive relief class actions … because there is no way to gauge the net value of the

settlement or any percentage thereof.” Hanlon at 1029. Here, by contrast, there is a Product

Fund worth $175 million. This is the value at retail. The selection of the products and the use

of their retail value are discussed in its Report and Recommendation on Final Approval of

Settlement and Plan of Distribution dated August 16, 2004. The percentage-of-recovery for

fee computation purposes is based on the total amount of that fund made available. Boeing,

444 U.S. at 479-80; Waters v. International Precious Metals Corp., 190 F.3d 1291, 1294

(11th Cir. 1999), cert. denied, 530 U.S. 1223 (2000) (“Waters”); Williams v. MGM-Pathe

Communications Co., 129 F.3d 1026, 1027 (9th Cir. 1997) (“Williams”); Six (6) Mexican

Workers v. Arizona Citrus Growers, 904 F.2d 1301, 1311 (9th Cir. 1990) (“Mexican

Workers”); Lealao v. Beneficial Calif., Inc., 82 Cal.App.4th 19, 40-41, 97 Cal. Rptr.2d 797,

814 (2000).11

5. Under the percentage-of-the-fund approach, the district court awards a

percentage of the fund created by the attorneys’ efforts as their reasonable attorneys’ fee.

Blum, 465 U.S. at 900 n.16. Using this approach, a long list of Ninth Circuit cases treat 25%

as a benchmark, which can be adjusted upward or downward as the circumstances of the case

require. Fischel, 307 F.3d at 1006; Vizcaino, 290 F.3d at 1047; Powers v. Eichen, 229 F.3d

1249, 1257 (9th Cir. 2000); Hanlon, 150 F.3d at 1029; Williams, 129 F.3d at 1027; In re

Coordinated Pretrial Proceedings in Petroleum Prods. Antitrust Litig., 109 F.3d 602, 607

(9th Cir. 1997) (“Petroleum”); Torrisi, 8 F.3d at 1376; Mexican Workers, 904 F.2d at 1311;

11 As the Eleventh Circuit said in Waters, 190 F.3d at 1294:

“In Boeing, the Supreme Court rejected petitioner’s argument that the attorneys’ fee award could be based only on the portion of the common fund actually claimed by class members and not from the unclaimed portion of the fund. See Boeing, 444 U.S. at 477. … The Court found that ‘to claim their logically ascertainable shares of the judgment fund, absentee class members need prove only their membership in the injured class. Their right to share the harvest of the lawsuit upon proof of their identity, whether or not they exercise it, is a benefit in the fund created by the efforts of the class representatives and their counsel.’ Id. at 480 ... (emphasis added).”


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Paul, Johnson, Alston & Hunt v. Graulty, 886 F.2d 268, 272 (9th Cir. 1989). In Vizcaino, an

employment law case, a 28% fee was upheld based on such factors as: (1) the exceptional

results for the class, (2) the risk for its counsel, (3) whether any individual non-monetary

benefits were obtained, (4) whether the fee is within the range typically associated with cases

of this kind, and (5) the burden on class counsel of prosecuting the case. 290 F.3d at 1048-50.

6. Here, Class Counsel prosecuted this case with no guarantee of receiving

anything, and have paid all costs and expenses to date without reimbursement. They have

expended 39,241.5 hours in professional services and incurred $1,109,197.02 in out-of-pocket

expenses. Scarpulla Decl., ¶80. They have obtained a $175 million Product Fund plus

significant injunctive relief. Thus, in accordance with the Ninth Circuit law, Class Counsel

are entitled to receive an award equal to 13.7% of the value of the Product Fund as

compensation for the services rendered, as well as reimbursement of their expenses. Indeed,

even counsel for some of the objectors conceded the fairness of this percentage request. Tr. at

104.

B. An Award Of 13.7% Of The Common Fund Is Reasonable And Fair.

7. Here, the percentage-of-the-fund sought by Class Counsel is 13.7%, which

is well below the benchmark established by Vizcaino and other cases. This is so, despite the

fact that Class Counsel achieved an excellent settlement in a risky case, which has been

vigorously litigated over five years at considerable expense. Not only did Class Counsel

obtain a $175 million Product Fund, but they also obtained: (a) the injunction contained in the

Stipulated Order; (b) substantial costs of notice, settlement administration and product

distribution, all of which have been or will be paid by defendants; and (c) $24 million in

attorneys’ fees and expenses. The 13.7% calculation has only been computed on the Product

Fund.

8. This request by Class Counsel also compares quite favorably with the

percentage of recoveries obtained in other major class action cases. Some recent surveys of

such recoveries include the following.


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• The Federal Judicial Center has issued a report indicating that a mean

rate of 27% and a median rate of 29% for fee awards in class action settlements

approved in district courts in Northern California from 1992 to 1994. T. Willging,

L. Hooper & R. Niemic, Empirical Study of Class Actions in Four Federal District

Courts: Final Report to the Advisory Committee on Civil Rules, 147 (1996), cited in

Fischel, 307 F.3d at 1009.

• A 1996 analysis of 433 shareholder class actions conducted by National

Economic Research Associates (“NERA”) concluded that “[r]egardless of case size,

fees average approximately 32 percent of the settlement.” D. Martin, V. Juneja,

T. Foster, F. Dunbar, Recent Trends IV: What Explains Filings and Settlements in

Shareholder Class Actions? 12-13 (NERA Nov. 1996).

• In Vizcaino, the Ninth Circuit surveyed 34 class action fee awards

across the nation that involved use of a percentage-of-the-fund method. 290 F.3d at

1052-54. The decisions from courts in the Ninth Circuit involved awards of 16.5-37%

of the common fund. In re Informix Corp. Sec. Litig., No. 97-1289 (N.D. Cal.,

Nov. 23, 1999) (Breyer, J.) (30%: $40 million fee, $137 million fund); In re Sorbates

Direct Purchaser Antitrust Litig., No. 98-4886 (N.D. Cal., Nov. 20, 2000) (Legge, J.)

(25%: $20 million fee, $82 million fund); Van Vranken v. ARCO, 901 F.Supp. 294

(N.D. Cal. 1995) (25%: $19 million fee, $76 million fund); In re IDB Communication

Group, Inc. Sec. Litig., No. 94-3618 (C.D. Cal., Jan. 17, 1997) (Hupp, J.) (16.5%:

$12 million fee, $75 million fund); In re Nat’l Health Labs. Sec. Litig., Nos. 92-

1949 & 93-1694 (S.D. Cal., Aug. 15, 1995) (Brooks, M.J.) (30%: $19 million fee,

$64 million fund); In re Melridge, Inc. Sec. Litig., No. 87-1426 (D. Ore., Mar 1, 1992,

Nov. 1, 1993 and Apr. 15, 1996) (Frye, J.) (37.1%: $20 million fee, $54 million

fund). See also In re Sodium Gluconate Antitrust Litig., No. C-97-4142 (N.D. Cal.

1999) (Wilken, J.) (court awarded fees equaling 30% of $4.8 million recovery). To

these may be added In re Methionine Antitrust Litig., Nos. C-003961, C-01-0944,


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C-01-2629, C-01-2759, C-01-3447, C-01-4292 (N.D. Cal., Oct. 3, 2002) (Breyer, J.)

(22.6%: $24 million fee, $107 million fund).

• A 2003 study surveying 1,120 class action fee awards from 1990 to

2003 found that in the 64 cases where the recovery exceeded $100 million, the average

award of both fees and costs was 15.1% of the common fund. “Attorney Fee Awards

in Common Fund Class Actions,” 24 Class Action Reporter 167 (2003) (“CAR”).

• A meta-analysis using the CAR data as well as an independent review

of class action case data from 1993-2002 concluded that, in antitrust cases, the mean

fee award was 21.4% of the common fund, while the median fee award was 23.3%.

T. Eisenberg & G. Miller, “Attorneys Fees in Class Action: An Empirical Study,”

1 Journal of Empirical Legal Studies (2004) (forthcoming) (“Eisenberg & Miller”)

(available at <http://www.stern.nyu.edu/clb/WP2003/03-017.pdf>).

9. Here, the requested fee award is $22,894,803, only 13.7% of the value of

the Product Fund. This figure falls well below the benchmark established by appellate and

district court opinions in the Ninth Circuit and also below the broader-based averages

identified by CAR and by Eisenberg & Miller.

10. The results obtained by Class Counsel demonstrate that the requested

attorneys’ fees are fair and appropriate. First, as stated above, the results obtained are

exceptional; a $175 million Product Fund plus injunctive relief were obtained for the Class in

a case where defendants denied any wrongdoing whatsoever. The results achieved here must

be considered in light of the strength of Plaintiffs’ case. The Ninth Circuit has confirmed that

“[e]xceptional results are a relevant circumstance” in deciding a fee award in common fund

cases. Vizcaino, 290 F.3d at 1048 (citing Torrisi v. Tucson Elec. Power Co., 8 F.3d 1370,

1377 (9th Cir. 1993), cert. denied, 512 U.S. 1220 (1994) (“Torrisi”) (it is proper to consider

plaintiffs’ counsel’s “expert handling of the case”)). In this case, the ample size of the

settlement and the fact that it was obtained in a highly complex case involving a nationwide

cartel, strongly supports the requested fee.


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11. Second, this settlement was obtained in the face of enormous risk and

without the benefit of any guilty pleas or ongoing criminal prosecution by federal or state

governmental authorities. See Linney v. Cellular Alaska Partnership, 151 F.3d 1234, 1240-41

(9th Cir. 1998) (discussing risks of proving fraudulent concealment and damages); In re

Cement and Concrete Antitrust Litig., 1981-1 Trade Cas. (CCH) ¶63,892 at 75,643 (D. Ariz.

1981) (“Cement”) (recognizing “complexity and uncertainty” of legal and factual issues in

antitrust case); In re Art Materials Antitrust Litig., 100 F.R.D. 367, 372 (N.D. Ohio 1983)

(recognizing difficulties of proof and likely costly trial on the merits).

12. Third, this case was undertaken by Class Counsel on a contingency basis

against able and well-financed opponents. Class Counsel expended considerable time and

resources with no assurance that they would receive any compensation. In fact, defendants

consistently took the position that Class Plaintiffs had no case. Class Counsel fought a

vigorous and highly focused battle with defendants, forcing them to turn over

evidence⎯oftentimes page by page⎯in order to construct their case.12 This work was neither

easy nor assured of success. Furthermore, as noted above, there were no guilty pleas or any

criminal prosecution by any federal or state governmental authority. In other words, Class

Counsel achieved this result by their efforts.

13. Fourth, it is axiomatic that antitrust conspiracy cases are complex and

difficult to litigate. See, e.g., Cement, 1981-1 Trade Cas. at 75,643. Success is never assured.

Compounding the difficulty of litigating this complex case, and obtaining relevant discovery,

was the fact that the alleged conspiracy began at least in the mid-1990s and involved both

horizontal and vertical components.

12 As the Court noted in Arenson v. Board of Trade of the City of Chicago 372 F.Supp. 1349, 1354 (N.D. Ill. 1974) “the attorneys for the plaintiffs as well as the attorneys for the defendants represent the cream of the anti-trust bar in the United States.” The same can be said in the instant case and is a factor to be considered in evaluating the quality of the services rendered. It also bears upon the credit to be given plaintiffs’ counsel for the “significant result achieved in this litigation. Arenson at 1354.


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14. Fifth, Class Counsel faced enormous litigation risks in this case. As noted,

had this case proceeded to summary judgment and trial, Class Counsel would have had to deal

with such thorny issues as causation and impact, as well as the issue of whether defendants

had in fact fraudulently concealed their alleged illegal conspiracy.

15. Sixth, the fee is reasonable when compared to customary private

contingency fee agreements. In such cases, the customary fee agreements, on a percentage

basis, usually range between 30% to 40% of the recovery. See Blum, 465 U.S. at 903 (“[i]n

tort suits, an attorney might receive one-third of whatever amount the plaintiff recovers. In

those cases, therefore, the fee is directly proportional to the recovery.”); In re M.D.C.

Holdings Sec. Litig., [1990 Transfer Binder] Fed. Sec. L. Rep. (CCH) ¶95,474 at 97,490 (S.D.

Cal. 1990) (“[i]n private contingent litigation, fee contracts have traditionally ranged between

30% and 40% of the total recovery.”).13 Thus, customary contingent fee agreements obtained

in the private marketplace, which range between 30% to 40% of the money recovered, also

validate the percentage fee requested in this case.

16. Class counsel did not take part of the benefits that would have gone to the

Class. Fees for attorneys and the Product Fund were negotiated independently; increasing the

former did not reduce the latter. See Yerman Decl., ¶11; Scarpulla Decl., ¶71. There is no

evidence in this record to the contrary. Moreover, the Ninth Circuit has permitted fee awards

based on agreements by defendants not to oppose fees up to a certain level as long as they are

reasonable, even in situations where the class in question got no cash. The role of the District

Court is important in these situations. It has the authority and the duty to pass upon the

fairness of the attorneys’ fee agreement independently of whether there was objection. See

Lobatz v. U.S. West Cellular of Calif., Inc., 222 F.3d 1142, 1144-45 (9th Cir. 2000); Zucker v.

13 As noted in Vizcaino, while evidence of such private agreements is not determinative, it may be “probative of the fee award’s reasonableness.” 290 F.3d at 1050.


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Occidental Petroleum Corp., 192 F.3d 1323, 1325, 1329(9th Cir. 1999), cert. denied,

529 U.S. 1066 (2000).14

17. It has also happened in other cases involving in-kind or coupon

settlements. See, e.g., Weiss v. Mercedes-Benz of N. America, Inc., 899 F.Supp. 1297, 1304

(D. N.J.), aff’d, 66 F.3d 314 (3d Cir. 1995); States of N.Y. & Md. v. Nintendo of America, Inc.,

775 F.Supp. 676, 679 (S.D.N.Y. 1991); In re Domestic Air Transp. Antitrust Litig.,

148 F.R.D. 297, 352-54 (N.D. Ga. 1993) (“Domestic Air”); In re Montgomery Cty. Real

Estate Antitrust Litig., 83 F.R.D. 305, 319-23 (D. Md. 1979); Phemister v. Harcourt Brace

Jovanovich, Inc., 1984-2 Trade Cas. (CCH) ¶66,234 at 66,995-98 (N.D. Ill. 1984); In re

Cuisinart Food Processor Antitrust Litig., 1983-2 Trade Cas. (CCH) ¶65,680 at 69,470 n.21

(D. Conn. 1983); Wershba v. Apple Computer, Inc., 91 Cal.App.4th 224, 254-55, 110

Cal.Rptr.2d 145 (2001), review denied. See Eisenberg & Miller at 2, 32 (noting that whether

or not a settlement consists of “soft” (i.e., non-monetary) relief has no material effect on a fee

award). As said in response to an argument in Domestic Air that the action was a “lawyers

case” where counsel received an “exorbitant amount of cash” while class members received

certificates of questionable value, this objection “ignores the value of the settlement and the

financial incentive necessary to induce experienced and well-qualified counsel to take on

complex and time-consuming cases for the benefit of the public and for which they may never

be paid or even reimbursed for considerable out-of-pocket expenses.” 148 F.R.D. at 306.

14 Indeed, defendants’ argument not to oppose fees up to a certain amount is not only typical of many settlements these days, but has a salutary value, as explained in Malchman v. Davis, 761 F.2d 893, 905 n.5 (2d Cir. 1985), abrogated on other grounds by Amchem Prods., Inc. v. Windsor, 521 U.S. 591 (1997):

“[W]here as here, the amount of the fees is important to the party paying them, as well as the attorney recipient, it seems to the author of this opinion that an agreement ‘not to oppose’ an application for fees up to a point is essential to completion of the settlement, because the defendants want to know their total maximum exposure and the plaintiffs do not want to be sandbagged. It is difficult to see how this could be left entirely to the court for determination after the settlement.”


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18. The Special Master will now deal with a few specific fee objections raised

by certain objectors. Objectors Patricia Corbin, Lisa Rice, and Wendy Bullock argue that this

is a “mega-fund” case under In re NASDAQ Market-Makers Antitrust Litig., 187 F.R.D. 465

(S.D.N.Y. 1998) (“NASDAQ”) and that use of a benchmark equaling 25% of the common

fund is inappropriate. Corbin Br., pp. 7-8. There are several responses to this argument.

First, as noted in Vizcaino, the Ninth Circuit does not follow an ironclad approach in “mega-

fund” cases; the size of the fund is merely one factor among many in determining a

reasonable attorneys’ fee. 290 F.3d at 1047. In that case, the Ninth Circuit approved a fee of

$27.1 million, equal to 28% of a $96.88 million settlement fund. Id. at 1050. Moreover, even

if NASDAQ created some strict rule that is to be followed here, the facts of that case are

instructive. There, the district court awarded $143.78 million in fees, equal to 14% of the

$1.027 billion settlement fund. 187 F.R.D. at 485. Here, by contrast, plaintiffs seek only

$22.89 million in fees, 13.7% of the value of the Product Fund.

19. Objector Hannah Feldman contends that no common fund has been created

and that a percentage-of-the-recovery approach is therefore improper under Staton v. Boeing

Co., 327 F.3d 938 (9th Cir. 2003) (“Staton”). Feldman Br., pp. 3-5. However, that case,

which involved settlement of an employment discrimination lawsuit, is distinguishable. In

Staton, the settlement entailed $3.77 million worth of monetary relief to class members, an

injunction requiring the defendant to take various steps to remedy past discrimination that was

valued by the parties at $3.65 million, and an agreement to pay $3.75 million to $3.85 million

in attorneys’ fees and expenses. 327 F.3d at 948-50. The monetary relief and the claimed

valuation of the injunctive relief were added together by the district court, which then

calculated the fee award to be worth 28% of this common fund. Id. at 972. The district court

engaged in no lodestar-based scrutiny of the fee award. Id. at 966. On appeal, the Ninth

Circuit reversed and remanded, holding that because the value of the injunctive relief was

difficult to quantify, the district court should have considered that relief as a factor in

awarding as fees a percentage of the common fund rather than as part of the fund itself. Id. at

974. Here, by contrast, no monetary valuation has been placed by the parties on the injunctive


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relief obtained. Instead, the valuation of the common fund in this case is based on the retail

value of the Product Fund. Moreover, unlike the district court in Staton, the Special Master

conducted independently a lodestar cross-check of plaintiffs’ requested fees.

C. The Result Under A Percentage-Of-The-Fund Approach Is Confirmed

By A Lodestar Cross-Check.

20. The reasonableness of a 13.7% award under a percentage-of-the-fund

approach is further confirmed by a cross-check of Class Counsel’s lodestar, as was done in

Vizcaino, 290 F.3d at 1051.15 . Scarpulla Decl., ¶71. The requested fee, thus, constitutes a

multiplier of approximately 1.69, well within the acceptable range of multipliers awarded in

complex cases of this type. Id. at 1050-51 (upholding a 28% fee award that constituted a 3.65

multiple of lodestar), 1052-54 (noting district court cases in the Ninth Circuit using

multipliers as high as 6.2).

21. As the Ninth Circuit noted in WPPSS, a risk multiplier to a basic lodestar is

appropriate to “reward attorneys for taking the risk of non-payment by paying them a

premium over their normal hourly rates for winning contingency cases.” 19 F.3d at 1299.

The resultant increase is “a legitimate way of assuring competent representation for plaintiffs

who could not afford to pay on an hourly basis regardless of whether they win or lose.” Id.

In WPPSS, the Ninth Circuit reversed the refusal to give a risk multiplier in an obviously

risky case. Id. at 1302.

22. Here, as noted in Vizcaino (290 F.3d at 1051), a multiplier is measured by

the duration of the case, its complexity, and the risk in prevailing. This case has gone on for

over five years, is extremely complex, and the risks of no success were high. A multiplier of

15 This lodestar has been obtained by multiplying the number of hours worked by personnel in each firm by current hourly rates. Use of a current hourly rate for all hours billed is a permissible way to account for delay in payment. Petroleum, 109 F.3d at 609; WPPSS, 19 F.3d at 1305. See Vizcaino, 290 F.3d at 1051. Each firm requesting fees has provided a declaration from one of its partners providing information by timekeeper about the total hours billed and the total lodestar.


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1.69 is therefore appropriate.16 Indeed, even counsel for some of the objectors conceded as

much. Tr. at 104.

D. The Expenses Sought Are Also Reasonable.

23. Class Counsel also ask to be reimbursed for the litigation costs and

expenses in the amount of $1,109,197.02.17 Under the common fund doctrine, Class Counsel

are entitled to reimbursement of all reasonable out-of-pocket expenses and costs in

prosecution of the claims and in obtaining a settlement. Vincent v. Hughes Air West, 557 F.2d

759, 769 (9th Cir. 1977). The declaration submitted by Class Counsel establishes that all of

the costs and expenses for which reimbursement is sought were reasonable and necessary in

order to obtain the result achieved. Scarpulla Decl., ¶¶78-80. Throughout the course of this

case, Class counsel have created contemporaneously documented time and expense records in

order to efficiently supervise the prosecution of this case. Id., ¶80.

24. It is common and appropriate for Class Counsel to be reimbursed out of the

common fund for all reasonable litigation expenses, including expenses for document

production, expenses for experts and consultants, expenses for delivery of documents and

expenses for Class administration including the mailing of class notices. See H. Newberg,

Attorney Fee Awards §2.19 at 69 (1986); Mills, 396 U.S. at 391-92.

25. Accordingly, Class counsel are entitled to be reimbursed for expenses

incurred to date in the amount of $1,109,197.02.18

16 The results obtained are excellent and extraordinary given the difficulties in this case, so the multiplier of 1.69 being requested could also be justified on results as well. See WPPSS, 19 F.3d at 1304. 17 In the declarations filed by partners from each firm seeking reimbursement, these costs and expenses are summarized by category. 18 However, since class counsel have sought for their attorneys’ fees, the difference between $24 million which is the amount Settling Defendants have stated they would not object to for the total of attorneys’ fees and costs of expenses and their costs to date of $1,109,197.02, they must bear the costs of future expenses related to the completion and administration of the settlement as incurred.


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III. CONCLUSION.

For the foregoing reasons, the Special Master recommends that the Court

award Class Plaintiffs 13.7% of the value of the Product Fund (which equals $22,890,802.98

as attorneys’ fees. In the alternative, the Special Master recommends that Class Counsel’s

gross lodestar amount of $13,546,749 be accepted and that they are entitled to a multiplier of

1.69, resulting in the same amount of attorneys’ fees. Finally, the Special Master recommends

that Class Counsel be reimbursed $1,109,197.02 for the expenses incurred to prosecute this

case.

Dated: August 12, 2004

By: /s/ Charles B. Renfrew Honorable Charles B. Renfrew (Ret.) Special Master


336531.02

8 UNITED STATES DISTRICT COURT - Rust Consulting · PDF file · 2004-08-23CLASS...

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