OPINION
This сase has followed the all too familiar path of large securities cases. It was filed as a class action by a number of well-recognized lawyers who specialize in plaintiffs’ securities litigation. The complaint named the usual cast of defendants — the corporation issuing the shares, in this case when the corporation went public; the officers and directors; the underwriters; the corporation's accountants; and a variety of venture capital defendants who sold their shares at or near the time the corporation went public. Various defendants moved to dismiss and the case moved lugubriously through the pleadings phase. Discovery assumed its usual massive proportions, and finally, as the case wound dоwn toward trial, settlement negotiations became serious and were aggressively pursued. On the eve of trial, after the parties had expended significant attorneys’ time and, hence, accumulated the routinely anticipated hours and fees, the case was settled.
Then began the process which all too often consumes a disproportionate share of the court’s time, the application for attorneys’ fees. It is at this point in these and other common fund cases that the court is abandoned by the adversary system and left to the plaintiff’s unilateral application and the judge’s own good conscience. Rarely do the settling defendants, who have created the pool of money from which the attorneys’ fees are awarded, offer any counterpoint; rarely do members of the class come forward with any response or opposition to the fees sought. There are no amici curiae who volunteer their advice.
For its guidance during this solitary inquiry, the court is confronted with a mountain of computerized billing records and, of course, the obligatory
Lindy
or
Kerr
factors.
See Lindy Bros. Builders, Inc. of Philadelphia v. Am. Radiator & Stan
*1375
dard Sanitary Corp.,
(“Lindy I”),
Courts have pursued a number of alternatives at the fee application stage. Some, by themselves or with the assistance of a magistrate, have waded through the computer printouts, which often represent years of work by several firms, their partners, associates, and paralegals. Others have appointed special masters familiar with the field and with attorney billing to perform the details of the task and to make a recommendation. The special master is then paid from the cоmmon fund. This court has used both of these alternatives. Undoubtedly, there are more creative ones that other courts have found. What is curious is that whatever method is used and no matter what billing records are submitted to the Lindy or Kerr-Johnson regimen, the result is an award that almost always hovers around 30% of the fund created by the settlement.
The question this court is compelled to ask is, “Is this process necessary?” Under a cost-benefit analysis, the answer would be a resounding, “No!” Not only do the Lindy and Kerr-Johnson analyses consume an undue amount of court time with little resulting advantage to anyone, but, in fact, it may be to the detriment of the class members. They are forced to wait until the court has done a thorough, conscientious analysis of the attorneys’ fee petition. Or, сlass members may suffer a further diminution of their fund when a special master is retained and paid from the fund. Most important, however, is the effect the process has on the litigation and the timing of settlement. Where attorneys must depend on a lodestar approach there is little incentive to arrive at an early settlement. The history of these cases demonstrates this as noted below in the discussion of typical percentage awards.
Adoption of a policy of awarding approximately 30% of the fund as attorneys’ fees in the ordinary case is well-justified in light of the lengthy line of cases which find such an award appropriate and reasonable before or after superimposing the
Lindy
or
Kerr
factors. Several years of this practice and the body of case law across the circuits validate this approach. The Supreme Court has accepted it. In
Blum v. Stenson,
Unlike the calculation of attorney’s fees under the “common fund doctrine,” where a reasonable fee is based on a percentage of the fund bestowed on the class, a reasonable fee under § 1988 reflects the amount оf attorney time reasonably expended on the litigation.
Id.
The Third Circuit, home of the
Lindy
formulation, recently criticized its application in common fund cases and recommended a return to a percentage of the fund approach. In the Report of the Third Circuit Task Force, Court Awarded Attorney Fees,
Other district courts confronted with fee applications have reached the same conclusion.
See, e.g., Mashburn v. Nat’l Healthcare, Inc.,
Mashburn, supra, contains an excellent discussion of the current status of the fee award practice in common fund cases. The decision gathers together the recent critical commentaries and authorities in the area. It is not necessary to repeat those here. All of them criticize the use of Lindy or Kerr-Johnson in common fund cases and recommend a percentage approach. It has been wisely stated by Professor Coffee that:
If one wishes to economize on the judicial time that is today invested in monitoring class and derivative litigation, the highest priority should be given to those reforms that restrict collusion and are essentially self-policing. The percentage of the recovery award formula is such a “deregulatory” reform because it relies on incentives rather than costly monitoring. Ultimately, this “deregulatory” approach is the only alternative to converting the courts into the equivalent of public utility commissions that oversee the plaintiff’s attorney and elaborately fix the attorney’s “fair” return.
Coffee, Understanding the Plaintiffs’ Attorney: The Implications of Economic Theory for Private Enforcement of Law Through Class and Derivative Actions, 86 Colum.L.Rev. 669, 724-25 (1986).
One circuit has explicitly approved the percentage approach in holding that the “'common fund' doctrine recognizes percentage awards and is not restricted purely to the lodestar method.”
Bebchick v. Wash. Metro. Area Transit Comm’n,
In another recent decision, the Seventh Circuit described the difference between the common fund and statutory fee-shifting bases for attorneys' fees.
Skelton v. Gen. Motors Corp.,
The court of appeals noted that there is greater reluctance to award multipliers in fee-shifting or “statutory” cases than in *1377 common fund or “equitable” cases. Id. at 253. Despite the differences, the court found that a risk multiplier was not precluded under the Magnuson-Moss Act and instructed the district court to reconsider whether a 75% or less enhancement was appropriate. Id. at 258. It is interesting that after its lengthy discussion of the doctrinal differences between the two methods, the сourt still indicated the same approach for both types of cases — calculation of the lodestar and, where justified, determination of the multiplier.
Judge Peckham of this court has observed that the Ninth Circuit, while adhering to the
Kerr-Johnson
factors, “has not, however, disapproved the use of the percentage of recovery approach in an appropriate case.”
Kirkorian v. Borelli,
This week this circuit for the first time acknowledged that the percentage method may be a better approach in some cases, referring to
Skelton
and
Bebchick. Paul, Johnson, Alston & Hunt v. Graulty,
This court’s review of recent reported cases discloses that nearly all common fund awards range around 30% even after thorough application of either the lodestar or twelve-factor method. Most of these cases achieve this result after lengthy motion practice, volumes of discovery, and hence, the accumulation of extensive attorney time on behalf of all parties. In
Wesely v. Spear, Leeds & Kellogg,
The case of
In re Public Serv. Co. of Ind. Derivative Litig.,
The court in Mashburn, supra, awarded the fee requested which was 19.5% of the fund, noting it was below the usual range, but also commenting on the results achieved at an early stage of the litigation. Mashburn, supra, 684 F.Supp at 693. The case was settled within one year of the filing of the complaint. In arriving at its decision, the court used the lodestar meth *1378 od, but also analyzed the percentage approach and justified it on that basis as well. Id. at 697 n. 8. At note 8, the court enumerated many common fund cases and included the percentage awards granted. Id.
The district court for the Southern District of New York also enumerated a number of common fund cases, many from the Southern and Eastern Districts of New York, whеre there are large numbers of security cases. In
In re Warner Communications Sec. Litig.,
A review of the cases cited in
Mashbum
and
Warner
and this court’s own analysis of other recent cases shows that the benchmark is at approximately 30% of the fund.
See, e.g., Golden v. Shulman,
[1988-89 Decisions Transfer Binder] Fed.Sec.L.Rep. (CCH) ¶ 94,060,
Reviewing this history the court is compelled to conclude that the accepted practice of applying the lodestar or Kerr-Johnson regime to common fund cases does not achieve the stated purposes of proportiоnality, predictability and protection of the class. It encourages abuses such as unjustified work and protracting the litigation. It adds to the work load of already overworked district courts. In short, it does not encourage efficiency, but rather, it adds inefficiency to the process.
Therefore, this court concludes that in class action common fund casеs the better practice is to set a percentage fee and that, absent extraordinary circumstances that suggest reasons to lower or increase the percentage, the rate should be set at 30%. This will encourage plaintiffs’ attorneys to move for early settlement, provide predictability for the attorneys and the class members, and reduсe the time consumed by *1379 counsel and court in dealing with voluminous fee petitions.
In this case, the Special Master, Jerome I.Braun, has done a skillful job of thoroughly analyzing the attorney billing records, declarations, and documentation in light of Lindy and the Kerr-Johnson factors. The court adopts and approves the Special Master’s Report and awards fees accordingly.
In the future, however, the court will opt for the percentage approach in common fund cases. This case demonstrates the reasons as discussed above. After three years of litigation, substantial discovery and motion practice, and on the eve of trial, a settlement was reached from which the attorneys will receive 32.8%, 22% of which was for attorneys’ fees, the remainder being expenses. A similar result could have been achieved much earlier in the litigation. With early disposition there are fewer expenses to be deducted from the settlement fund, thereby creating an incentive of receiving a greater percentage of the fund in attorneys’ fees. The integrity of the attorneys’ fee application process would be enhanced and the class members would receive at least the same benefits and receive them earlier.
For the reasons stated above and in the Special Master’s Report, the court awards the amount of $1,161,413.81 in attorneys’ fees and $398,705.55 in expenses for a total of $1,560,119.36 or 32.8% of the settlement fund. The fees and costs are to be paid in the manner set forth on page thirty of the Report and apportioned in accordance with the proportions reflected in the adjusted totals contained in the appendix to the report.
IT IS SO ORDERED.