IN RE JOHNSON & JOHNSON DERIVATIVE LITIGATION, No. 3:2010cv02033 - Document 254 (D.N.J. 2013)
Court Description: OPINION filed. Signed by Judge Freda L. Wolfson on 11/25/2013. (kas, )
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*NOT FOR PUBLICATION* UNITED STATES DISTRICT COURT DISTRICT OF NEW JERSEY IN RE JOHNSON & JOHNSON DERIVATIVE LITIGATION : : : : : : : : _ : Civil Action No. 10-2033(FLW) Civil Action No. 11-4993(FLW) Civil Action No. 11-2511(FLW) OPINION WOLFSON, United States District Judge: The Court settlement action, Futility in which and has this previously approved consolidated includes suits (collectively, Plaintiffs ). shareholder brought Demand-Refused the by parties derivative both Demand- Plaintiffs-Shareholders The remaining determination in this case is the amount of attorneys fees and costs to be awarded to Plaintiffs counsel.1 Plaintiffs counsel2 1 In this Court s prior Opinion dated October 26, 2012 (the October Opinion ), the Court, inter alia, approved the final settlement reached between Defendant Johnson & Johnson Corp. and Plaintiffs. In Re Johnson & Johnson Derivative Litig., 900 F.Supp. 2d 467 (D.N.J. 2012) ( October Opinion ). In addition, the Court found that awarding attorneys fees and costs to Plaintiffs counsel is appropriate. Id. at 496. I note that defendants do not object to Plaintiffs attorneys fees up to a maximum of $10 million. 2 The law firms which represent the Demand-Futility plaintiffs are: Carella, Byrne; Robbins, Geller; Bernstein seek in excess of $6.5 million in attorney s fees and approximately $450,000 in costs, as well as a multiplier of 1.5. Presented with a multitude of attorneys and voluminous time entries, this Court, appointed a Special Master to assist in making the lodestar calculations and determining compensable costs, pursuant to Fed. R. Civ. P. 53.3 The issue of whether a multiplier is appropriate and if so, in what amount, was left for this Court following the Special Master s Report on the lodestar. In her well-reasoned and thorough, 138-page Report and Recommendation (the Report ), the Special Master recommends that this Court award counsel $5,383,905.76 in fees, and $416,305.73 in costs. As discussed below, objections were filed challenging various aspects of the Report concerning the lodestar calculations. This Opinion reflects the application. ADOPTS in Court s final determination of the fee For the reasons set forth below, the Court full the Special Master s Report as follows: Litowitz; and Morris and Morris. The Demand-Refused plaintiffs are represented by: Kantrowitz, Goldhamer; and Abraham Fruchter. 3 In an Order dated October 22, 2012, this Court appointed the Hon. Harriet Derman, J.S.C. (Ret.), as the Special Master. 2 counsel are awarded fees in the total amount of $5,383,905.76, and expenses in the amount of $416,305.73. Furthermore, the Court denies counsel s request for a multiplier. BACKGROUND The underlying facts and procedural history of this case have been fully set forth by this Court in its October Opinion and in the Report; as such, to promote judicial economy, the Court incorporates those facts herein, and will only delineate additional facts that are necessary and relevant to the issues addressed here. Briefly, these derivative suits essentially accused J&J, inter alia, of failing to comply with product recalls, lack of good marketing and manufacturing violating practices, federal and off-label state drug statutes. Plaintiffs allege that based on various wrongdoings, J&J breached its fiduciary duty to its shareholders. After the resolution of J&J s motions to dismiss,4 the parties reached a settlement, and as a result, the Court held a fairness hearing, wherein 4 I heard the parties At the time the settlement discussion began, the Demand-Futility Plaintiffs complaint had been dismissed without prejudice, and a motion to dismiss the DemandRefused Plaintiffs complaint was pending. 3 respective positions on the settlement terms, as well as objections from the public. On October 26, 2012, this Court issued its Opinion and Order approving the settlement and also approved, in principle, an award of attorneys fees and costs to counsel for Plaintiffs. In that connection, I determined that to calculate the amount of the fees, a undertaken. counsel s traditional However, fee as lodestar I declarations have and analysis explained time records must be previously, were not sufficiently detailed in order for this Court to engage in the searching and thorough inquiry that a lodestar analysis requires. in And, more importantly, the time records produced support Accordingly, of the I fee application instructed were Plaintiffs voluminous. attorneys to supplement the record, and further, to assist the Court in its review, I appointed a Special Master to recommend the appropriate lodestar amount. Summary of Special Master s Report Plaintiff s counsel, collectively, seek fees for over 12,500 hours of work spent on litigating these cases, and the documents purportedly supporting the appropriateness of those hours thoroughness are of substantial the Report and extensive. reflects, 4 the Special As the Master carefully and scrupulously evaluated the records, as well as requested counsel to produce additional documentation, and on several occasions, met with counsel. I will only briefly summarize the Report s conclusions. The Special appropriate Master hourly was for rate tasked each with determining counsel, and the the time expended by various Plaintiffs attorneys in this matter was reasonable. by examining plaintiffs She first conducted the lodestar analysis the firms. 12,797.70 In that hours spent process, the by the Special six Master commented on the divisiveness of the firms representing the separate plaintiffs including the at resources became and litigation. this Court inception rancor between Refused Plaintiffs. settlement the of these matters, Demand-Futility and Demand- However, when the possibility of a a reality, pursued a the common firms goal combined to their amicably end Nonetheless, as the Special Master found, and agrees, inefficiencies, the billing firms errors, efforts and were in some plagued by instances, inflated hourly rates. As the Special Master noted, the number of hours and concomitant fees in this application when been there has very limited 5 are extraordinary discovery in these matters, and the cases were in their infancy. Furthermore, the Special Master was concerned with the manner in which the hours were billed, and indeed, this Court shared the same views when application Master for found reviewing fees. that some the More of provide sufficient details activity being inefficiencies duplication and of billing efforts, particularly, the billed. settlement as time to the Coupled for bloated and the records type hourly Special failed of with unnecessary the task to or attorneys work, rates and were the billing of lawyers at partner rates for low level tasks. Thus, the Special Master reduced the total requested fees to $5,383,905.76. The chart below represents the breakdown of the recommended lodestar awarded to each firm: FIRM Hours Expended Requested Lodestar Recommended Lodestar Carella Byrne 1,701.50 $927,997.95 $777,265.00 Berstein Litowitz 2,305.50 $1,084,585.55 $676,630.63 Robbins Geller 1,158.00 $564,067.50 $487,718.75 Morris and Morris 4,074.50 $2,181,711.54 $1,946,323.75 Demand-Futility 6 Demand-Refused Abraham Fruchter 2,755.25 $1,607,587.59 $1,032,173.13 Kantrowitz Goldhamer 802.95 $520,901.76 $463,794.50 TOTAL $5,383,905.76 Summary of Objections Pursuant directed to the Fed. parties, R. Civ. P. including 53(f)(2), objectors, the to Court submit objections to the Special Masters recommendations, if any. One of the principally objectors, Mark challenges the G. Petri aspect of (the the Objector ), Report that addresses the reduction of fees resulting from internal warfare of Plaintiffs counsel. More specifically, the Objector argues that the Special Master committed a legal error on the issue whether $1.15 million of lodestar spent on fighting amongst the groups of Plaintiffs attorneys to become lead counsel is billable to the shareholders.5 5 After the issuance of the Report, I directed the Special Master to submit a separate spreadsheet which enumerates the hours she subtracted for counsel s time spent on three specific categories: (1) motions for appointment of lead counsel and any opposition thereto; (2) Demand-Refused counsel s motion for, and complaint in, intervention; and (3) opposition to the motion for 7 The Morris Firm also objects to the Report. firm does not take issue with the While the recommended lodestar amount, it does object on the basis that the Special Master erred when she suggested that the risks of counsel s contingency fee business model should not be shifted to the defendant. The Morris Firm is concerned because it argues that in a common benefit case, such as this matter, J&J is funding the award of attorneys fees as the beneficiary of the benefits achieved by Plaintiffs counsel, not as an unsuccessful defendant. And, the Morris Firm submits that this distinction is important when evaluating whether a multiplier is appropriate. In legal addition, and factual the Bernstein errors Firm allegedly objects made in to certain the Report; however, it does not seek to change the overall recommended lodestar award. First, like the Morris Firm, the Bernstein Firm argues that the Court s fee award, particularly in the multiplier context, must not be based on the law of fee shifting for rather, this corporate the type benefit benefit of of fee a prevailing award should analysis. litigant, be Furthermore, based the but on a Bernstein Firm takes issue with the Special Master s treatment of intervention. 8 certain hourly attorneys. rate declarations from other New Jersey Lastly, the Firm disagrees with some of the findings and comments made by the Special Master regarding the manner in which the Bernstein Firm litigated these matters. The Abraham and Kantrowitz Firms collectively ask this Court to reject their requested the Report s fees. In recommended their reductions objections, both in firms generally disagree with the Special Master s finding that some of the firms billings were excessive, related to work that was unnecessary. once again justify their hourly vague or In an attempt to billing, the firms delineate the reasons why the reductions of their billable hours by the Special Master were not warranted. discuss those contentions more fully below. I will As a final note, both the Carella and Robbins Firms do not object to the recommendations made by the Special Master, and no one has objected to the Special Master s recommendation as to the compensable expenses. 9 DISCUSSION I. The Lodestar Amount A. Standard of Review Federal standard Rule this of Court Civil Procedure applies when 53 sets reviewing forth the the Special Master's Report and Recommendation. See Fed. R. Civ. P. 53(f)(3)-(5). In that connection, with respect to the Special Master s decisions, the Court "may adopt or affirm, modify, wholly or partly reject or reverse, or resubmit to the master with instructions." Fed. R. Civ. P. 53(f)(1). It is clear that "[t]he court must decide de novo all objections to conclusions of law made or recommended by a master." Fed. R. Civ. P. 53(f)(4). Similarly, all objections to the master's findings of fact, unless the parties stipulate otherwise, are reviewed de novo. Fed. R. Civ. P. 53(f)(3). On the other hand, "[t]he Special Master's rulings on procedural matters are reviewed under the abuse of discretion standard." Honeywell Int'l, Inc. v. Nikon Corp., 2009 U.S. Dist. LEXIS 17115, at *1 (D. Del. Mar. 4, 2009) (citing Fed. R. Civ. P. 53(f)(5)). With the above standards in mind, I acknowledge that it is the role of this Court to review de novo the Special Master s conclusions of law 10 and fact. Indeed, I have thoroughly reviewed the Report and the accompanying exhibits, as well as the parties declarations in support of their fees; having done so, I agree with the Special Master s assessment of the lodestar analysis. in this Opinion, I will only address the Therefore, specific objections raised by the parties. B. Petri s Objection The Objector billed by the asks various this Court to Plaintiffs exclude any hours attorneys in their efforts to become the lead counsel for both the DemandFutility and Demand-Refused plaintiffs in this consolidated matter. Indeed, the Objector made the same argument to the Special Master. According to the Objector s calculations, the number of hours expended in those efforts amounted to approximately $1.15 million in fees. Specifically, the Objector identifies three categories of fees that should be excluded: 1. 592.5 hours ($361,800) for the four law firms fight over who would become Demand-Futility lead counsel. 2. Demand Refused counsel claims 755.75 hours ($495,280.75) for its motion to intervene and motion to appoint lead and liaison counsel in the demand refused actions, as well as 334.9 hours ($194,554.00) on a complaint in intervention. 11 3. Demand Futility counsel seeks to include 153.5 hours ($98,363.75) for time spent in opposing Demand Refused counsel s motion to intervene. The nature of the internal warfare among counsel was summarized in the Report. The Special Master remarked that combative exchanges between Plaintiffs attorneys at one time were intense. tension by and See Report at p. 91. among the competing Suffice to say, Demand-Futility attorneys and the competing Demand-Refused attorneys, as well as the tension between the Demand-Futility and DemandRefused attorneys, necessitated the expenditure of over 1,500.00 hours or almost twelve percent (12%) of the hours sought. the Id. at p. 92. in-fighting The Special Master did not treat lightly. She acknowledged that [a] great deal of time and money was spent to secure a spot on the team. Id. In that regard, the Special Master questioned whether this internal dispute brought any value to the shareholders of J&J. Having made that Id. assessment, however, the Special Master declined to exclude wholesale the $1.15 million in fees identified by internal warfare. the Objector as hours related to Rather, the Master reasoned that she had already deducted some of the hours objected to on other grounds, i.e., that they were excessive or vague. 12 The remaining hours, the Special Master explained, were not otherwise objectionable since those efforts even if they were related to the appointment of lead counsel conferred some benefit to the class. While the Objector See Report at p. 95. did not have the benefit of a breakdown of the subtractions taken by the Special Master in these categories, pursuant to my request, the Special Master recently submitted a separate spreadsheet outlining the deductions taken. The following chart summarizes those reductions. Category Amount of Deduction % of Reducti on Taken Motions for $361,800.00 Appointment of Lead Counsel and Any Oppositions thereto, filed by Demand Futility Counsel $103,079.38 28.46% Motion for $689,834.75 Intervention; Motion to Appoint Lead Counsel; and Complaint in Intervention $217,037.50 31.46% Opposition to Motion for Intervention $23,194.38 11.61% applies determine The Amount Billed standard which $98,363.75 the Court to whether fees should be deducted is straightforward: it is 13 axiomatic that hours not reasonably expended must be excluded from the fee calculation, Hensley v. Eckerhart, 461 U.S. 424, 434 (1983), and hours are not reasonablely extended if they unnecessary. are redundant or otherwise Rode v. Dellarciprete, 892 F. 2d 1177, 1183 (3d Cir. 1990). Time expended is considered reasonable if the work performed necessary excessive, to secure was useful and of a type ordinarily the final result obtained from the litigation. " Public Interest Research Group of N.J., Inc. v. Windall, 51 F.3d 1179, 1188 (3d Cir. 1985). With that in assertion that all mind, hours I reject spent the by Objector s Plaintiffs broad counsel related to the appointment of lead counsel or intervention were not necessary or did not secure the results reached in this case. necessary counsel First, the lead counsel selection process is and for appropriate the class. in See order In re to secure Lucent Litig., 194 F.R.D. 137, 156 (D.N.J. 2000). competent Techs. Sec. Indeed, the motion practice involved in selecting counsel ultimately led to an organizational plan, agreed to by the parties, concerning which law firms would represent plaintiffs in both Demand Futility and Demand Refused actions. While the process may have been contentious at times, the efforts 14 expended by these firms were beneficial in reaching the outcome. Likewise, the Court finds that the Demand Refused counsel s filing of its motion to intervene was necessary to protect the interests of the demand refused plaintiffs. Thus, I reject the Objector s position that counsel should not be compensated for any work related to those efforts. That said, however, I do find excessive the hours spent on motion practice related to the above-referenced three categories of fees. Having independently reviewed the billing entries and corresponding hours billed for each category, I concur with the Special Master s observations that some of the hours are excessive, vague or otherwise not necessary, and therefore, reductions are appropriate. In that regard, I further find that the reductions taken by the Special Master, as outlined in the above chart, are sufficient to reasonable account or for useful hours in billed achieving that the were final not result reached in this case. C. The Morris and Bernstein Firms Objections Both the Morris and Bernstein Firms disagree with the Special Master s contingency fees. comments regarding the nature of More specifically, both Firms argue that the Special Master should not have applied a fee-shifting 15 analysis because this case should be analyzed under the common benefit doctrine, and this distinction is important to the determination whether a multiplier is appropriate. I disagree with the Firms characterization of the Special Master s reasoning, particularly since she was not tasked with, nor did she engage in, an analysis of fees vis-a-vis whether a multiplier should be applied. Rather, her analysis was limited to a lodestar calculation, and she appreciated that this is a common fund case. At the outset, I note that while the attorney s fees sought in this case are not based upon statutory or contractual fee-shifting, in a common benefit case where there is no monetary benefit conferred through litigation, the lodestar formula is a method commonly used to determine attorney s fees. Lindy Bros. Builders Inc. of Philadelphia v. American Radiator & Standford Corp., 487 F.2d 161 (3d Cir. 1973); In re Schering-Plough/Merck Merger Litig., No. 09-1099, 2010 U.S. Dist. LEXIS 29121, at *53 (D.N.J. Mar. 26, 2010);" Joy Mfg. Corp. v. Pullman-Peabody Co., 742 F. Supp. 911, 913 (W.D. Pa. 1990). The lodestar method involves multiplying the number of hours expended by the attorneys reasonable hourly rate. Johnson, 900 F.Supp. 2d. at 16 496. See In re Johnson and In that regard, the Special Master appropriately analyzed counsel s hourly rates using the lodestar analysis, which is not disputed by the parties. The language from the Report with which the Firms take issue read as follows: I have also never understood why the element of contingency should generate a higher rate for taking the risk; it would seem to me that practitioners who have undertaken an uphill legal battle would be happy to settle for some compensation - unless it was not uphill at all and was in actuality almost a certainty. In this contingent matter, with J&J as a defendant, a dozen firms were falling all over themselves to participate. In any event, the possibility of losing one contingent case and therefore compensating with higher rates in another matter is not the problem of the defendant in the second matter. Report at p. 117. However, the Special Master was responding to counsel s position that they should receive their substantial undertook the requests prosecution for of fees this because matter counsel entirely on a contingency basis and assumed significant risks in bringing these claims. The Special Master clarified that in determining the lodestar, the focus is on the appropriate hourly rate for each counsel and the reasonableness of the time expended. lodestar is In other calculated words, that the it is Court only after the then determines whether to decrease or increase the amount by applying a 17 multiplier, which attempts to account for the contingent nature and risk involved in a particular case and the quality of the attorneys work. In re Diet Drugs, 582 F.3d 524, 540 n.33 (3d Cir. 2009). Indeed, the Special Master appropriately focused on a traditional lodestar analysis as opposed to whether an enhancement is warranted based upon risk and contingency.6 Therefore, the Firms objection to the Special Master s comments about fees and contingencies appears to misapprehend the import of her observations.7 Finally, the factors to risk be and contingent considered in nature of determining a case are whether an enhancement or multiplier applies, which will be decided by me, infra, and were not a part of the Special Master s Report. Next, suggestion the that Court the addresses Special the Master Bernstein erred Firm s when she disregarded the hourly rate declarations from prominent 6 It is appropriate to consider if the issues in this case are novel and complex neither of these criteria account for an increased hourly rate here. 7 The Special Master s comments are, however, well taken. As this Court has observed in other matters, the setting of hourly rates by firms, such as the Morris and Bernstein Firms, whose clients are almost exclusively contingent fee clients, does not necessarily reflect a reasonable fee for lodestar analysis. 18 New Jersey argues attorneys because the Declarations ).8 ( Rate hourly rates set forth The in Firm the Rate Declarations are consistent with rates approved by courts around the country, there was no basis for the Special Master to discount them. The Court disagrees. The Special Master had an independent obligation to determine whether the Rate Declarations were appropriate and sufficient to support Special the hourly Master declarations. declarations rates found requested several in this case. deficiencies in The those First, the Special Master explained that the failed to comment on the fact that their billing rates may be applicable for periodic non-contingent clients while the clients in this matter are not contractually obligated to ever pay the designated rate or any other declarants did rate. not Report, offer p. any provide specific references. Id. 109. specific Moreover, the comparisons or Another deficiency, the Special Master noted, was the lack of information regarding 8 Plaintiffs Counsel submitted the following declarations from attorneys in New Jersey: (1) Michael D. Sirota, Esq., co-managing shareholder of Cole, Scholtz, Meisel, Forman & Lenoard, P.A.; (2) Stephen M. Greenberg, Esq., counsel to McElroy, Deutsch, Mulvaney & Carpenter LLP; and (3) John A. McGahren, Esq., a partner at Patton Boggs LLP. 19 whether the requested rates are commensurate District s prevailing market rates. Id. with this Additionally, the Affidavits do not cite to a single specific case where counsel s proposed derivative action. rates were awarded Id. at 110. in a shareholder Thus, the Special Master concluded that the Rate Declarations were not helpful to her in determining reasonable hourly rates for the relevant market. Given the explanations, this Court agrees with the Special Master s conclusions, and I find that she properly gave less weight to the Rate Declarations. Finally, the Bernstein Firm requests this Court not to repeat or adopt certain unnecessary criticism of counsel in the Report. the Report, Having carefully reviewed the contents of I do not find that the Special Master has overstated or inappropriately remarked upon the attorneys and their billing practices. Indeed, the Master was tasked by this Court to compare the work performed by each of the lawyers with determine the the Necessarily, in number of hours appropriateness order to make of billed the that in order requested determination, to fees. the Special Master was well within her authority to support the recommended deductions with her explanations. 20 D. The Abraham and Kantrowitz Firms Objections Before the Special Master, the Abraham and Kantrowitz Firms requested a total of $2,128,489.35 for a combined 3558.20 hours billed. Based on various and indeed, extensive reasons, the Special Master reduced both firms fees to $1,495,967.63. Unsurprisingly, the Abraham Firm takes Special issue with reducing its fees. performed was the Abraham the Master s for In its view, the majority of the work appropriate and justified. Firm reasoning insists that hours In that regard, billed for the following four categories of work should not have been so drastically reduced : 1) obtaining, reviewing and analyzing documents other relating factual to DePuy s updates; (2) exhibits from the civil improper sale of Risperdal; metal hip reviewing trials relating (3) replacement transcripts to drafting the a and and alleged books and records action which was not filed; and (4) working on the complaint in intervention and the Katz Complaint. I agree with categories, I the will Special only Master s briefly deductions comment on Because in the these Abraham Firm s objections. As to the first category, the Special Master correctly determined that some of the hours the Abraham Firm billed 21 reviewing documents relating to the DePuy metal hip replacement were excessive, while others produced no value to the class. The deductions taken in this category of fees were necessary because, as the Special Master found, some of the hours are plainly excessive. To highlight this problem, the Abraham Firm routinely over-billed for sending emails. In one example, the firm charged over 2.5 hours for sending a routine email to co-counsel. instances, the Abraham performed as Doc Firm simply review And, in other designated without the indicating documents, or even the subject matter, being reviewed. work what In those specific instances, the Special Master appropriately reduced all of the hours, which amounted to over 50 hours. I need not go through the entries one by one since that task was competently performed by the Special Master, and because I agree with her observations, I reject the Abraham Firm s objection on this issue. Next, Master s I am in reductions transcript review. complete in the agreement hours with billed the for Special Risperdal While the Abraham Firm argues that it was necessary to review the transcripts, I find excessive that the firm dedicated well over 180 hours to that routine task. Accordingly, a deduction of 125.25 hours in this 22 category is more than reasonable; had I reviewed those hours in the first instance, I might have taken an even greater deduction. related to Likewise, the Abraham Firm s billing drafting a book and records action was excessive. Furthermore, because such an action was never initiated, the significant amount of time spent on preparing the complaint added no value to the benefit of the corporation and the shareholders. last category, I have already Finally, as to the addressed, supra, the reasonableness of the hours that both firms spent on the Complaint in Intervention. In sum, I do not find convincing the objections made by the Abraham and Kantrowitz Firms. Accordingly, having addressed, and rejected, all of the objections made by the parties, the Court adopts in full the Special Master s report and recommendation. II. Multiplier Before I assess whether an award of a multiplier is appropriate, I clarify, as I did in my previous Opinion, that an award of attorneys fees in this case is based on the substantial through benefit corporate conferred governance upon reforms the shareholders achieved by the settlement, and not based upon a monetary award to the 23 sharholders. Indeed, this is not the classic type of common fund case wherein a monetary fund is created for the benefit of a class. fitting where As a result, a lodestar analysis is there is no monetary component to the settlement and no valuation of the non-monetary award upon which the Court could base a percentage. Johnson, 900 F.Supp. 2d at 498; see In re Johnson & In re Rite Aid Corp. Sec. Litig., 396 F.3d 294, 300 (3d Cir. 2005). distinction, I multiplier turn, is next, to warranted. the In issue that With that whether a connection, notwithstanding the fact that the Special Master, in her lodestar analysis, recommended reducing the requested fees to $5.38 million, counsel continue to request that this Court award fees in the amount of $10 million, which results in a multiplier of approximately 1.86. After determining the appropriate lodestar figure for attorney s fees, the court may either increase or decrease the lodestar amount through the use of a multiplier. Id. A multiplier attempts to account for the contingent nature or risk involved in a particular case and the quality of the attorneys work. Id. (quoting In re Diet Drugs, 582 24 F.3d 524, 540 n. 33 (3rd Cir. 2009)).9 Further, in order to receive an upward adjustment, the fee applicant must show some basis that such an adjustment is necessary to provide fair and reasonable compensation. See In Re: Prudential Ins. Co. Am. Sales Practice Litig., 148 F.3d 283, 340 (3d Cir. 1998). An upward adjustment generally may not based on factors already accounted for in determining the original lodestar figure. (1984). See Blum v. Stenson, 465 U.S. 886, 898-99 To illustrate, a multiplier cannot be based on the novelty and complexity of the issues because those factors have been accounted for in determining the number of billable hours and the reasonable hourly rate. Id.; see, e.g., McLendon v. Continental Group, Inc. 872 F. Supp. 142, 162 (D.N.J. 1994) (rejecting a lodestar enhancement based on the quality of the representation because that factor was accounted for in petitioners hourly rate); Bagel Inn, Inc. v. All Star Dairies, 539 F. Supp. 107, 113 (D.N.J. 1982) (denying a petition for lodestar enhancement for one of the firms involved in the litigation because the 9 In a classic lodestar valuation, it is presumed that the lodestar figure represents the reasonable fee. As such, a multiplier is only warranted in special circumstances. Perdue v. Kenny A., 559 U.S. 542, 552-53 25 quality of services . . . is reflected in the hourly rate ); Lake v. Nationwide Bank, 900 F. Supp. 726 (E.D. Pa. 1995) (declining to apply a quality multiplier even though the attorneys shepherd[ed] this case efficiently ); Cerva v. E.B.R. Enterprises, Inc. 740 F. Supp. 1099, 1106 (E.D. Pa. 1990) (declining to apply a quality multiplier because petitioner s skill was already reflected in his high rate); Orson Inc. v. Miramax Film, Corp., 14 F. Supp. 2d 721, 726 (E.D. Pa. 1998) (denying enhancement of lodestar because petitioner s only basis for such a request was the novelty of the issues ); Ciccarone v. B.J. Marchese, Inc. 03-CV1600, 2004 WL 2966932, at *4 (December 22, 2004 E.D. Pa) (holding that an enhancement multiplier was inappropriate because the work was adequate, but not outstanding and the settlement was for far less than initially sought). Nevertheless, courts have noted that since one of the goals of performing the lodestar analysis is to assure that counsel undertaking socially beneficial litigation receive an adequate fee irrespective of the monetary value of the final relief achieved for the class, multipliers can be applied to compensate attorneys who take on risky, but socially beneficial litigation. (2010). 26 In re Schering-Plough Corp. S holders Derivative Litig., No. 01-1412, 2008 WL185809, at *5 (D.N.J January 14, 2008) (citing In re GMC Pick-up Truck Fuel Tank Prods. Liab. Litig., 55 F.3d 768, 821 (3d Cir. 1995)). In sum, [m]ultipliers may reflect the risks of non[-]recovery facing counsel, may serve as an incentive for litigation, result. counsel or By may to undertake reward nature they counsel are socially for an extraordinary discretionary susceptible to objective calculation." beneficial and not In re Prudential, 148 F.3d at 340. In this warranted for case, I several do not find reasons. that a Counsel multiplier argues, at is the outset, that in common fund cases where the lodestar method is used to cross check percentage-of-recovery awards, the Third Circuit has approved multiples ranging from one to four. See In re Prudential, 148 F.3d at 341. However, this is not a common fund case, and therefore, it is not appropriate for this Court to rely on the line of cases that deals with multipliers in that context. Rather, as the case law instructs, I can only award a multiplier in this case if I find that the lodestar insufficiently accounts for the risks of litigation, the contingent nature of the case, the results achieved 27 and the quality of representation. These compel enhanced fees. factors, however, do not always See Goldberger v. Integrated Res., 209 F.3d 43, 54 (2d Cir. 2000). I begin with the premise that I find the lodestar amount of approximately $5.38 million more than adequately compensates performed. over Plaintiffs counsel for the work While counsel, collectively, purportedly spent 12,000 hours litigating these matters, consolidated actions were still in their infancy. discovery had Demand-Futility dismissed they occurred, and without prejudice. importantly, the Plaintiffs, more Complaint As for the these Little for had the been Demand-Refused Plaintiffs, the Court stayed Defendants motion to dismiss pending the outcome of the settlement discussions. For cases that have not progressed beyond the motion to dismiss stage, $5.38 million in fees is a substantial award. In fact, because the lodestar is substantial, an additional multiplier cannot be justified. In my view, the lodestar properly accounts for the results achieved and the quality of representation. The hourly rates awarded in this case range from $125 to $750. Indeed, most of the partners of the law firms charged well over $600 an hour. In light of the significant hourly 28 rates, counsel are sufficiently compensated for the quality of their work, which recognizes skills and experience. into account by the recommendations. position that multiplier. the various attorneys These factors were already taken Special Master when she made her In addition, I disagree with counsel s the complexity of this case warrants a I find that the degree of complexity involved with the issues in these cases is more than adequately reflected in the number of hours billed. See Discussion, infra. Moreover, whether Plaintiffs would ultimately prevail is a factor that this Court weighed heavily, not only in finding the determination appropriate. settlement that an reasonable, award of but also attorneys in my fees is See In re Johnson & Johnson, 900 F.Supp. 2d at 484. Indeed, the Special Master discussed the results achieved through properly be the settlement, compensated for and those how counsel results. should Accordingly, because the lodestar calculations took into account those considerations, I need not provide a further enhancement in this regard. See Pa. v. Del. Valley Citizens' Council for Clean Air, 483 U.S. 711, 753 (1987) ( a multiplier[] is not designed to be a windfall for the attorney ). 29 Nor is an enhancement necessary to compensate counsel for the contingent nature of this case. I doubt that the contingency nature and the risk of nonpayment discouraged Plaintiffs counsel Report, p. 116. from pursuing this litigation. See Indeed, that conclusion is bolstered by the number of attorneys seeking to be first in the door in filing lawsuit on behalf of shareholders, and the intense level of counsel. competition litigating who would become lead In my view, from counsel's perspective, this was a "promising" case, holding the prospect of a large fee recovery from solvent defendants. See Goldberger v. Integrated Res., 209 F.3d 43, 53-54 (9th Cir. 2000)(refusing to award a multiplier when the contingent nature of the case was in doubt). observations that: (1) My conclusion counsel rests benefitted on the from the spadework done by federal authorities, whose investigations had progressed substantially at the time of the filing, and during, issue the which litigation; loomed (2) there significant in was no this groundbreaking case; (3) the likelihood of non-payment was slim, because J&J, a wellestablished public entity, is solvent, and the individual directors and officers were the beneficiaries of an insurance policy; (4) use of current hourly billing rates 30 compensated counsel for delay in payment; and (5) use of high hourly billing rates compensated counsel for the quality of their efforts, and what risk there was in the case. See, e.g., Charles v. Goodyear Tire and Rubber Co., 976 F. Supp 321, 325 (D.N.J. 1997)( a positive multiplier is not warranted as the fee award is more than reasonable and already accounts for the risks of litigation, the contingent nature of the case, the results achieved and the quality of representation. ). Having considered all of the factors, I find that an award of a multiplier is not warranted since enhancing fees above the already generous rates included in the lodestar would result in overcompensation and thus, a windfall to counsel to the detriment of the shareholders. 31 III. CONCLUSION For the foregoing reasons, the Special Master s Report and Recommendation is ADOPTED in its entirety. Plaintiffs counsel amount are awarded fees in the total of $5,383,905.76, and expenses in the amount of $416,305.73. Counsel s request for a multiplier is DENIED. Dated: 11/25/2013 /s/ Freda L. Wolfson Freda L. Wolfson, United States District Judge 32
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