Over $3.4 Million in Fees At Stake.
Flanagan, Lieberman, Hoffman & Swaim v. Ohio Public Employees Retirement System (In re Bank of America Corp.), No. 13-2919 (2d Cir. Mar. 17, 2016) (published) involved a non-lead counsel in a federal class action securities case who failed to file a notice of appearance but did work after the appointment of well-known lead counsel, which endorsed non-lead counsel’s request to be reimbursed over $3.4 million in attorney’s fees. The class action settlement amount was $2.435 billion, with all plaintiffs’ counsel (both lead and non-lead) agreeing to cap fees at 6.56% of the settlement fund less certain expenses (amounting to about $158.6 million in fees, cross-checked by a lodestar of $88.3 million such that the requested amount was a lodestar augmented by a positive 1.8 multiplier). However, the district judge disallowed fees entirely to the non-lead counsel, but awarded fees to the other plaintiffs’ counsel and prohibited them from paying anything to non-lead counsel. The district judge reasoned that non-lead counsel did not engage in work producing a “substantial benefit” to the case.
The Second Circuit reversed and remanded. It found that, under the circumstances, the district court should have applied a standard of deference to lead plaintiff’s counsel’s determination that the non-lead counsel fees were proper, rejecting application of the “substantial benefit” test and preferring use of the “presumption of correctness” test. All counsel had agreed to the capped fee arrangement upfront, with lead counsel having no incentive to endorse non-lead counsel’s fees if they were not proper. The Second Circuit did indicate that the “presumption of correctness” was rebuttable, listing several factors which could refute the correctness prima facie showing. It also was bothered by the ban in allowing co-lead counsel from sharing their fees with non-lead counsel if co-lead counsel so chose. So, the matter was remanded for the district judge to apply the “presumption of correctness” test to non-lead counsel’s fee request.