CARROLL et al v. STETTLER et al
Filing
418
MEMORANDUM AND/OR OPINION RE: PLAINTIFFS' MOTION FOR FINAL APPROVAL OF PARTIAL CLASS ACTION SETTLEMNT (DOC. NO. 401). SIGNED BY HONORABLE MARY A. MCLAUGHLIN ON 10/19/2011. 10/20/2011 ENTERED AND COPIES MAILED TO PRO SE AND UNREPS, E-MAILED.(kk, )
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IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
THOMAS CARROLL, et al.
v.
WILLIAM STETTLER, III,
et al.
:
:
:
:
:
:
:
CIVIL ACTION
NO. 10-2262
MEMORANDUM
McLaughlin, J.
October 19, 2011
This action arises out of a “Ponzi” scheme orchestrated
by Lizette Morice and her company, Gaddel Enterprises, Inc.
(collectively “Gaddel”).
After a Class Action Fairness Act
(“CAFA”) hearing held on September 30, 2011, the Court grants the
plaintiffs’ motions for final approval of a partial class action
settlement, and for an award of attorneys’ fees, expenses, and
incentive awards for class representatives. .
I.
Background
A.
Factual and Procedural History
Class representatives Thomas Carroll and Kimberly Baker
brought this lawsuit, claiming that they lost their entire
$57,000 investment in a Ponzi scheme wherein Lizette Morice and
her company, Gaddel Enterprises, Inc. (collectively, “Gaddel”)
falsely represented to investors that they purchased foreclosed
properties and sold them at a profit.1
The plaintiffs initiated
this class action on behalf of themselves and all other investors
that suffered a net loss in their investments with Gaddel since
April 1, 2006.
Complaint ¶ 36.
The complaint named as
defendants the persons who orchestrated the Ponzi scheme (the
“Gaddel Insiders”) as well as other investors who were net
winners because they received more money from Gaddel than they
invested (the “Net Winner Defendants”).
Id. ¶ 10.
The plaintiffs brought a claim under the Pennsylvania
Uniform Fraudulent Transfer Act (“PUFTA”), 12 Pa. Cons. Stat. §
5101 et seq., for avoidance and recovery of fraudulent transfers,
as well as a common law unjust enrichment claim.
They sought pro
rata distribution of the profits from the scheme among the
plaintiffs and class members.
On November 12, 2010, the Court denied two motions to
dismiss the complaint, finding that the plaintiffs had stated a
claim under PUFTA to recover funds transferred through a Ponzi
scheme.
In January 2011, the Court referred the matter to
Magistrate Judge Elizabeth T. Hey for settlement negotiations.
Following several months of negotiations, the plaintiffs reached
a settlement in principle with a group of defendants (the
1
Morice admitted at her plea hearing that, in reality,
Gaddel was a Ponzi scheme and that no real estate transactions
ever occurred. Tr. of Change of Plea Hr’g, 14-16, July 23, 2008,
ECF No. 362-11.
2
“Settling Defendants”) to recover 80% of the net profits that the
Settling Defendants received from Gaddel.
B.
The Partial Settlement Agreements
This Court preliminarily approved two waves of partial
settlements in this case.
The settlement agreements define the
Settlement Class as all persons or entities who invested with
Gaddel since April 1, 2006 and incurred a net loss, excluding the
defendants and any Gaddel officers, employees, or affiliates.
Pls.’ Mem. of Law in Supp. of Mot. for Final Approval of Partial
Class Action Settlement, Exs. A-E.
The Settling Defendants
agreed to collectively pay $739,164.10 into a fund (the
“Settlement Fund”) in exchange for a release and dismissal of all
claims.
Under the settlement, the claims administrator then
calculates the pro rata share for each class member and
distributes the Settlement Fund accordingly.
See id.
The Court granted preliminary approval of the
settlement for a first wave of Settling Defendants on May 17,
2011, and approved the form and content of the notice to be
disseminated to the class.
On July 26, 2011, the Court granted
the preliminary approval and authorization to disseminate revised
class notice for a second wave of Settling Defendants.
Nos. 327, 367.
3
See ECF.
On July 18-19, 2011, defense liaison counsel and class
counsel served all proposed settlements and other pleadings
required to be disclosed under CAFA on the U.S. Attorney General
and other state attorneys general in states in which the class
members reside.
See Decl. of Charles Kocher regarding Service of
CAFA Notice ¶ 5, ECF No. 366.
No attorney general’s office
objected to the proposed settlement.
The Texas Attorney
General’s Office responded regarding the timeliness of notice,
but did not object to the substance of the proposed settlement.
See Pls.’ Mem. of Law in Supp. of Mot. for Final Approval of
Partial Class Action Settlement, Ltr. from Michelle M. Teed,
Ass’t Att’y Gen. of TX, to Jeffrey D. Bukowski, Esq., Ex. F.
C.
Notice to the Class
The claims administrator attests that the court-
approved class notice was sent by first-class mail to 2,627
members of the Settlement Class.
Where updated or corrected
addresses were available, the claims administrator re-mailed
notices that were returned as undeliverable.
Furthermore, the
claims administrator published the class notice and other
critical case documents on a website dedicated to the Gaddel
settlement.
See id., Decl. of Matthew Shillady ¶¶ 4, 5, 6, Ex. G
(“Shillady Decl.”).
4
D.
The Response of the Class
Out of the 2,627 class members to whom notice was
mailed, the claims administrator received two requests for
exclusion from the class, one objection to the request for
attorneys’ fees, expenses, and incentive awards by Steven
Muchnij, and one notice of intention to appear at the fairness
hearing.
E.
See Shilady Decl. ¶¶ 8-10.
Motions
Class counsel have requested 33 1/3% of the Settlement
Fund for attorney’s fees.
Class counsel also seeks reimbursement
for litigation expenses in the amount of $21,034.26 and an
incentive award of $2,500 each for Thomas Carroll and Kimberly
Baker, the two named class representatives.
See Pls.’ Mot. for
Award of Attys.’ Fees, Expenses, and Incentive Awards for Class
Reps. at 1, ECF No. 402.
Finally, class counsel moves for final
approval of the partial settlements.
The Court heard oral
presentations from the parties at a CAFA fairness hearing on
September 30, 2011.
II.
No objectors appeared.
Analysis
A court presented with a request for approval of a
class certification and settlement must separate its analysis of
the class certification from its determination that the
5
settlement is fair.
See In re Insurance Brokerage Antitrust
Litig., 579 F.3d 241, 257 (3d Cir. 2009).
The Court therefore
decides the following four questions in turn:
A)
B)
whether notice to the (b)(3) class regarding the
settlement and attorneys’ fees petition was
adequate under Rule 23(c)(2)(B);
C)
whether the settlement itself is fair, reasonable
and adequate; and
D)
A.
whether the proposed settlement class can be
properly certified under Federal Rule of Civil
Procedure 23;
whether class counsels’ petition for attorneys’
fees, out-of-pocket expenses and special awards to
the class representatives should be approved.
Class Certification
The Court has granted the plaintiffs’ motion for class
certification in a memorandum and order bearing today’s date.
That order sets forth more fully the Court’s reasons for
certifying the class.
The Court briefly summarizes below.
To certify a class under Rule 23, a court must find
that all four prerequisite requirements of Rule 23(a) and at
least one part of Rule 23(b) have been met.
See Baby Neal v.
Casey, 43 F.3d 48, 55 (3d Cir. 1994).
The Court finds that the plaintiffs’ have met the
numerosity, commonality, typicality, and adequacy prerequisites
of Rule 23(a).
The class contains over 2,500 members who are
similarly situated because they must demonstrate the defendants’
6
liability for the allegedly fraudulent transfers and counter any
affirmative defenses that the defendants raise.
Furthermore, the Court finds this case suitable for
certification under Rule 23(b)(3).
First, common issues as to
the liability and conduct of the defendants predominate in both
the PUFTA and unjust enrichment claims.
Second, a class action
is the superior method of adjudication in this matter because the
class members have little interest in prosecuting separate
actions, no other litigation has been initiated by class members,
and it is desirable to consolidate all of the claims into one
forum.
B.
Adequacy of Notice
A court must determine that notice was appropriate
before evaluating the merits of the settlement itself.
See,
e.g., In re Prudential Ins. Co. Am. Sales Practice Litig. Agent
Actions, 148 F.3d 283, 326-27 (3d Cir. 1998).
Under Rule
23(c)(2)(B), notice must be given to potential class members by
the best notice practicable under the circumstances for all
classes certified under Rule 23(b)(3).
This includes individual
notice to all potential class members that can be identified
through reasonable effort.2
2
Notice must, in clear, concise and plain language, state:
(i) the nature of the action; (ii) the definition of the class
certified; (iii) the class claims, issues or defenses; (iv) the
7
In this case, the notice given met the requirements of
Rule 23(c)(2)(3).
The mailed notice described the proposed
settlement, its terms, and the nature of the claim filed on
behalf of the class.
It also described the class members’ right
to object or to be excluded from the settlement, including their
opportunity to be heard at the fairness hearing, and the binding
effect of the settlement on those who choose not to opt out.
Individual notice forms were mailed to 2,627 identified
class members.
Those notifications that were returned as
undeliverable were re-sent if another address could be found
using a locator database.
Furthermore, the claims administrator
published the class notice and other critical case documents on a
website dedicated to the Gaddel settlement.
See Shillady Decl.
¶¶ 4, 5, 6.
Because individual notices were sent to all identified
class members and because the notice was widely disseminated
through the Internet, the Court finds that the notice given meets
the requirements of Rule 23(c)(2)(B).
class member’s right to enter an appearance by an attorney; (v)
the class member’s right to be excluded from the class; (vi) the
time and manner for requesting exclusion; and (vii) the binding
effect of settlement on class members. See Fed. R. Civ. Pro.
23(c)(2)(B).
8
C.
Fairness of the Settlement3
In order to approve a class settlement, a court must
find that the settlement is fair, reasonable and adequate and in
the best interests of the class under Rule 23(e).
In re Gen.
Motors Corp. Pick-Up Truck Fuel Tank Prods. Liab. Litig., 55 F.3d
768, 785 (3d Cir. 1995) (“In re General Motors”).
When
considering a class settlement, the “court plays the important
role of protector of the [absent class members’] interests, in a
sort of fiduciary capacity.”
Id.
The Court finds that the proposed settlements are
entitled to a presumption of fairness, that the Girsh factors
support approval of the settlement, and that the lone objector’s
concerns do not render the settlement unreasonable.
1.
Presumption of Fairness
The U.S. Court of Appeals for the Third Circuit has
directed district courts to apply an initial presumption of
fairness when reviewing a proposed settlement where: (1) the
3
The Court has jurisdiction to rule on the settlement. The
Court has subject-matter jurisdiction under minimal diversity.
28 U.S.C. § 1332(d)(2). The Court has personal jurisdiction over
the plaintiffs and the absent class members based on the notice
provided to all class members, which informed them of the nature
of the litigation, their opportunity to be heard and their
opportunity to withdraw from the class. See In re Prudential
Ins. Co. Am. Sales Practice Litig. Agent Actions, 148 F.3d 283,
306 (3d Cir. 1998) (citing Phillips Petroleum v. Shutts, 472 U.S.
767, 811-12 (1985)).
9
settlement negotiations occurred at arm’s length; (2) there was
sufficient discovery; (3) the proponents of the settlement are
experienced in similar litigation; and (4) only a small fraction
of the class objected.
In re Warfarin Sodium Antitrust Litig.,
391 F.3d 516, 535 (3d Cir. 2004).
The Court finds that the
proposed settlements here are entitled to a presumption of
fairness.
First, the settlement negotiations were negotiated at
arm’s length under the careful supervision of Magistrate Judge
Elizabeth T. Hey.
Second, there has been extensive discovery in this
case.
The plaintiffs have received written discovery from the
Settling Defendants, 70 boxes of materials from the government in
response to the plaintiffs’ subpoena, as well as the defendants’
bank records.
See Pls.’ Mot. for Prelim. Approval of a Partial
Settlement, Decl. of Charles J. Kocher (“Kocher Decl.”), Exs. 14,
17, ECF Nos. 312-1, 315-2.
Plaintiffs also deposed an alleged
Gaddel Insider, James Martin.
Third, class counsel have significant class action
experience.
Kocher Decl., Exs. 18, 21, ECF Nos. 315, 319.
Finally, the claims administrator received only one
objection out of the 2,627 settlement class members to whom
notice was disseminated.
Furthermore, only two class members
opted out of the settlement.
Because of the positive response to
10
the proposed class settlement, in addition to the factors above,
the settlement is entitled to a presumption of fairness.
2.
Girsh Factors
In Girsh v. Jepson, 521 F.2d 153 (3d Cir. 1975), the
Court of Appeals for the Third Circuit set forth the following
nine specific factors that a district court should consider in
determining whether a settlement is fair, reasonable and
adequate:
(1) the complexity, expense and likely duration of the
litigation; (2) the reaction of the class to the settlement; (3)
the stage of the proceedings and the amount of discovery
completed; (4) the risks of establishing liability; (5) the risks
of establishing damages; (6) the risks of maintaining the class
action through the trial; (7) the ability of the defendants to
withstand a greater judgment; (8) the range of reasonableness of
the settlement fund in light of the best possible recovery; (9)
the range of reasonableness of the settlement fund to a possible
recovery in light of all the attendant risks of litigation.
Id.
at 157.
The Court finds that the Girsh factors do not disturb
the initial presumption of fairness and, in fact, generally
support the conclusion that the settlement is fair, reasonable
and adequate to the class members.
11
a.
Complexity, Expense, and Duration
The first Girsh factor, which considers the probable
cost, in both time and money, of continued litigation, weighs
heavily in favor of settlement.
Continuing the litigation would
be an expensive and time-demanding affair requiring the
depositions and dispositive motions from each of the Settling
Defendants.
b.
Reaction of the Class
The second Girsh factor, which “attempts to gauge
whether members of the Class support the settlement,” also weighs
heavily in favor of settlement.
318.
In re Prudential, 148 F.3d at
In Stoetzner v. U.S. Steel Corp., the Third Circuit found
that the response of the class members, which included 29
objections out of 281 class members, “strongly favor[ed]
settlement.”
897 F.2d 115, 119 (3d Cir. 1990).
As stated above,
the claims administrator in this case received only one objection
and two opt-out notices out of 2,627 members.
The objector, Steven Muchnij, objects that the Settling
Defendants were able to “keep” 20% of their payout while he lost
12
his entire investment.4
The Court finds that the objection has
no merit.
Muchnij’s objection to the 80% recovery term in the
settlement agreement is merely a disagreement with a term agreedupon through arms-length negotiations.
As the Third Circuit
stated, a court evaluating the fairness of a settlement should
“guard against demanding too large a settlement based on its
views of the merits of the litigation; after all, settlement is a
compromise, a yielding of the highest hopes in exchange for
certainty and resolution.”
In re General Motors, 55 F.3d at 806.
Here, in exchange for recovering at least 80% of the net profits
from the Net Winner Defendants who are settling, the settlement
class avoids the risks and expenses of protracted litigation and
receives certainty and resolution.
In this case, particularly
because the Settling Defendants were not participants in, but
rather also victims of the Gaddel Ponzi scheme, the Court finds
that Muchnij’s objection to the recovery term is without merit.
c.
Stage of Proceedings
The stage-of-proceedings factor of the Girsh test seeks
to determine whether class counsel had an adequate appreciation
4
He also objects to the attorneys’ fees, out-of-pocket
expenses, and incentive awards for the named class
representatives as being excessive. The Court addresses these
objections below. See infra Section D.
13
of the merits of the case before negotiating.
Motors, 55 F.3d at 813.
In re General
This factor weighs in favor of
settlement in this case.
As stated above, the parties have had the benefit of
extensive discovery, including: written discovery responses from
the Settling Defendants, documents from the government’s
prosecution of Lizette Morice, and other documents and charts
produced by the government pursuant to the plaintiffs’ subpoena.
Furthermore, class counsel successfully defeated two motions to
dismiss and received a favorable disposition from this Court.
Lastly, settlement negotiations also shed light on the strengths
and weaknesses of the case and the risks of litigation.
The parties therefore had a more than sufficient basis
for assessing the merits of the case when they submitted their
motion for final approval of the settlement.
d.
Risks of Establishing Liability and Damages
The fourth and fifth Girsh factors require the Court to
examine what the potential rewards (or downside) of litigation
might have been had class counsel elected to litigate the claims
rather than settle them.
In re General Motors, 55 F.3d at 814.
In this case, these factors weigh slightly in favor of
settlement.
14
Here, there appears to be strong evidence demonstrating
the existence of a Ponzi scheme, including the admission of
Lizette Morice at her plea hearing, as well as documents from the
government showing the transfer of money from Gaddel to the
defendants’ bank accounts.
Given that the mere existence of a
Ponzi scheme is sufficient to establish actual intent to defraud
under PUFTA, the plaintiffs are likely to reap rewards if they
litigate their PUFTA claim.
See Hecht v. Malvern Prep. Sch., 716
F. Supp. 2d 395, 400-01 (E.D. Pa. 2010).
Yet the rewards will come at a cost.
Although the
plaintiffs have already borne many of the costs for obtaining and
reviewing the evidence to support their claims, they will bear
litigation fees and costs if they proceed to trial.
Given that
the settlement agreement provides for recovery of at least 80% of
the profits that the Settling Defendants made from the Gaddel
scheme, it is not clear that the rewards of recovering at most an
additional 20% of profits from the Settling Defendants outweigh
the costs of litigating the case.
This Girsh factor therefore
weighs slightly in favor of settlement.
e.
Risks of Maintaining Class Status
The sixth Girsh factor does not weigh either in favor
of or against settlement in this case.
In an order bearing
today’s date, the Court has granted the plaintiffs’ motion for
15
class certification.
At this stage, the Court sees no reason to
believe that the plaintiffs will encounter difficulty maintaining
the class through trial.
However, although a risk that
plaintiffs may not be able to maintain the class cuts in favor of
settlement, the Court perceives no reason why the likelihood of
maintaining class status should cut against settlement.
See
Lachance v. Harrington, 965 F. Supp. 630, 646 (E.D. Pa. 1997).
On net, therefore, this Girsh factor does not sway the Court in
either direction.
f.
Ability of the Defendants to Withstand a
Greater Judgment
The seventh Girsh factor weighs heavily in favor of
settlement in this case.
Although the Settling Defendants in
this case received profits from the Gaddel Ponzi scheme, they did
not participate in the scheme and were themselves tricked into
thinking that Gaddel was a legitimate investment operation.
The
Settling Defendants include individuals who potentially do not
have sufficient assets to withstand a judgment amount greater
than their respective settlement amounts.
For example, two
Settling Defendants, Herman Park and Ricardo Diaz, have filed for
bankruptcy since signing the settlement agreement, while others
have failed to timely make payments into the Settlement Fund as
prescribed by the settlement agreement.
Therefore, even if the
risks of establishing liability and damages at trial are not
16
high, the amount of recovery may not even increase.
Any
increased recovery could be offset by increased litigation
expenses.
g.
Range of Reasonableness in Light of the Best
Possible Recovery and All the Attendant Risks
of Litigation
The eighth and ninth Girsh factors weigh in favor of
settlement.
As discussed above, the settlement provides recovery
to the plaintiffs of at least 80% of the net profits from
Settling Defendants.
Litigating to recover the remaining 20% of
profits from Settling Defendants, many of whom are individuals
without substantial assets, is a risky endeavor and may not yield
increased returns on net.
Therefore, given that the settlement in this case is
entitled to an initial presumption of fairness, and given that
most of the Girsh factors either weigh in favor of settlement or
do not weigh against it, the Court approves the settlement as
fair and reasonable.
D.
Attorneys’ Fees, Expenses, and Incentive Award
Class counsel in this case seek 33 1/3% of the total
settlement fund, litigation expenses in the amount of $21,034.26,
and an incentive award in the amount of $2,500 each for the named
17
representatives, Thomas Carroll and Kimberly Baker.
The Court
finds these requests fair and reasonable and grants the motion.
1.
Attorneys’ Fees
Class counsel in a class action who recover a common
fund for the benefit of persons other than their client are
entitled to a fair and reasonable award of attorneys’ fees from
the fund as a whole.
Boeing Co. v. Van Gemert, 444 U.S. 472, 478
(1980); In re Cendant Corp. Securities Litig., 404 F.3d 173, 187
(3d Cir. 2005).
The dominant method for awarding attorneys’ fees
in common fund cases is the percentage-of-recovery approach.
at 188.
Id.
Third Circuit jurisprudence also urges a “lodestar
cross-check” to ensure that the percentage-of-recovery approach
does not lead to a fee that represents an extraordinary lodestar
multiple.
Id.
The cross-check is performed by dividing the
proposed fee award by the lodestar calculation, resulting in a
lodestar multiplier.
Cir. 2006).
In re AT&T Corp., 455 F.3d 160, 164 (3d
The Court finds the requested fee award reasonable
under both methods.
a.
Percentage-of-Recovery Method
The Third Circuit requires district courts to consider
seven factors when determining the reasonableness of a fee
calculated via the percentage-of-recovery method.
18
Gunter v.
Ridgewood Energy Corp., 223 F.3d 190 (3d Cir. 2000).
The factors
are: (1) the size of the fund created and number of persons
benefitted, (2) the presence or absence of substantial objections
by members of the class to the settlement terms and/or fees
requested by counsel, (3) the skill and efficiency of the
attorneys involved, (4) the complexity and duration of the
litigation, (5) the risk of nonpayment, (6) the amount of time
devoted to the case by the plaintiffs’ counsel, and (7) the
awards in similar cases.
Id. at 195 n.1.
These factors “need
not be applied in a formulaic way . . . . and in certain cases,
one factor may outweigh the rest.”
Id.
The Court finds that
many Gunter factors weigh in favor of approving the attorneys’
fees in this case.
First, there was only one objection to the attorneys’
fees, expenses, and incentive awards.
Steven Muchnij objected
generally to the requests as “excessive” without articulating a
specific reason.
merit.
The Court finds that the objection has no
Class counsel has expended considerable amounts of time
in this litigation, conducting research, coordinating service and
discovery on defendants, defeating two motions to dismiss, and
negotiating a substantial partial settlement.
As the Court
explains, the fee request for 33 1/3% of the settlement fund is
reasonable.
19
Second, the record shows that plaintiffs’ counsel have
considerable experience handling complex class action lawsuits.
See Decl. of Charles Kocher, Exs. 18, 21, ECF Nos. 315, 319.
Class counsel have also ably represented the class throughout
motion practice, obtained a significant amount of discovery, and
negotiated settlement agreements on their clients’ behalf.
Third, this litigation has involved novel issues and
required extensive coordination on the part of class counsel to
identify, locate, serve, and conduct discovery on numerous
defendants.
It is believed to be the first class action brought
under a uniform fraudulent transfer statute to recover the
proceeds of a Ponzi scheme on behalf of victims of the scheme.
Fourth, class counsel’s compensation in this case was
contingent on the success of the litigation.
Given the risks of
bringing the lawsuit, establishing liability and damages, and the
possibility of non-payment by the defendants, this factor weighs
in favor of finding that the percentage of the settlement fund
requested is appropriate.
See Bradburn Parent Teacher Store,
Inc. v. 3M, 513 F. Supp. 2d 322, 339 (E.D. Pa. 2007).
Fifth, class counsel devoted a considerable amount of
time to prosecuting this case.
According to the logs provided by
counsel, the attorney hours for this case total 1,127.55 hours.
Pls.’ Mot. for Award of Attys.’ Fees, Expenses & Incentive Awards
for Class Reps., Exs. 1, 2.
20
Lastly, district courts in this circuit have typically
awarded attorneys’ fees of 30% to 35% of the recovery.
See In re
Raviscent Techs., Inc. Sec. Litig., No. 00-1014, 2005 U.S. Dist.
LEXIS 6680, at *40 (E.D. Pa. Apr. 18, 2005) (collecting cases).
b.
Lodestar Cross-Check
The Third Circuit recommends use of a lodestar crosscheck as “a means of assessing whether the percentage-of-recovery
award is too high or too low.”
544 n.42 (3d Cir. 2009).
In re Diet Drugs, 582 F.3d 524,
Under the lodestar method of
calculation, courts multiply the number of hours reasonably
expended by counsel by a reasonable hourly rate.
Courts may then
adjust upwards or downwards, depending on the circumstances.
Pennsylvania v. Delaware Valley Citizens’ Council for Clean Air,
478 U.S. 546, 563 (1986); In re AT&T Corp., 455 F.3d at 164 n.4.
In this case, the lodestar calculation yields a figure
of $463,343.50 as of March 31, 2011.
Pls.’ Mot. for Award of
Attys.’ Fees, Expenses & Incentive Awards for Class Reps., Exs.
1, 2.
The lodestar multiplier here, where counsel have requested
33 1/3% of the $739,164.10 Settlement Fund, is thus less than one
(0.53).
A lodestar multiplier of less than one reveals that the
fee request constitutes only a fraction of the work that the
attorneys billed and is within the accepted range in the Third
Circuit.
In re Ins. Brokerage Antitrust Litig., 579 F.3d 241,
21
284 (3d Cir. 2009); In re Diet Drugs, 582 F.3d at 544 (finding
that a lodestar multiplier in the range of 2.6 or 3.4 is below or
near the average multiplier in “super-mega-fund” cases); In re
Prudential, 148 F.3d at 341 (recognizing that lodestar
multipliers from one to four are frequently awarded in common
fund cases).
Therefore, the lodestar cross-check confirms the
reasonableness of class counsel’s fee request in this case.
2.
Expenses
Attorneys who create a common fund for the benefit of a
class are entitled to reimbursement of reasonable litigation
expenses from the fund.
See In re General Motors, 55 F.3d at 820
n.39.
The Court therefore overrules the objection from Steven
Muchnij and approves counsel’s request for reimbursement of
litigation expenses.
3.
Incentive Award
Incentive awards to class representatives lie within
the discretion of the trial court and may be provided as a reward
for efforts to benefit the class.
See Chakejian v. Equifax Info.
Servs., LLC, 275 F.R.D. 201, 220 (E.D. Pa. 2011); Hall v. Best
Buy Co., Inc., 274 F.R.D. 154, 173 (E.D. Pa. 2011).
22
Courts use
the following factors to evaluate the appropriateness of awards:
(1) the financial, reputational, and personal risks to the
plaintiff; (2) the degree to which the plaintiff was involved in
discovery and other litigation responsibilities; (3) the length
of litigation; and (4) the degree to which the named plaintiff
benefitted as a class member.
Id.
The named plaintiffs in this case attended hearings in
the criminal case against Lizette Morice, the orchestrator of the
Ponzi scheme.
They also worked with the government to ascertain
the identity of investors who profited from Gaddel and the amount
of their net profits.
Pls.’ Mot. for Award of Attys.’ Fees,
Expenses & Incentive Awards for Class Reps., Decl. of Thomas
Carroll ¶ 7, Ex. 4.
In addition, the named plaintiffs retained
counsel and worked with counsel throughout the litigation.
The Court finds that it is proper to recognize the time
and effort that Thomas Carroll and Kimberly Baker expended on
behalf of the absent class members.
Furthermore, the Court finds
that the sum of $2,500 to each representative is well within the
range of awards that other courts have approved and, as such, is
clearly reasonable.
See, e.g., McCoy v. Health Net, Inc., 569 F.
Supp. 2d 448, 479-80 (D.N.J. 2008) (approving a $60,000 incentive
award to each representative plaintiff); Perry v. FleetBoston
Fin. Corp., 229 F.R.D. 105, 118 (E.D. Pa. 2005) ($5,000).
23
The
Court therefore overrules the lone objection from Muchnij as to
the incentive awards and approves the request.
III. Conclusion
For the reasons herein stated, the Court grants the
plaintiffs’ motion for final approval of partial class action
settlement and motion for award of attorneys’ fees, expenses, and
incentive awards for class representatives.
The Court hereby
certifies the class and approves the settlement in this class
action.
An appropriate order follows separately.
24
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