ORDER ON JOINT PETITION OF CLASS COUNSEL AND PLAINTIFFS’ STEERING COMMITTEE FOR AN AWARD OF ATTORNEYS’ FEES AND REIMBURSEMENT OF LITIGATION EXPENSES
This matter came before the Court upon the Joint'Petition of Class Counsel and Plaintiffs’ Steering Committee seeking an award of attorneys’ fees and expenses from the common fund created by the settlement of this action. - The Court, having heard oral argument, having reviewed the materials on file, and being fully advised in the premises herein, hereby FINDS and ORDERS as follows:
Background
The Court has provided a more detailed history of this action in its prior orders.
See In re Copley Pharmaceutical, Inc.,
Following certification as a class action and appointment of class counsel, this action moved forward with surprising speed and efficiency. During expedited discovery, class counsel reviewed and analyzed more than 125,000 pages of documents and deposed roughly one hundred witnesses. One year and seven days after consolidation before this Court, trial commenced. And after 42 days of trial, in which each side presented an impressive case, the parties entered into a preliminary settlement agreement.
Class counsel and Plaintiffs’ Steering Committee (“class counsel”) now seek attorneys’ fees and expenses pursuant to that settlement agreement (“Agreement”). Class counsel requests an award of 25% of what they deem to be a $150 million fund, resulting in a fee of $37.5 million; Defendant urges the Court to award roughly 20% of the $60 million that it estimates has already been paid out under the fund, resulting in a fee of $12 million.
The Settlement Agreement
The Agreement, perhaps surprisingly, does not fix the amount of class counsel’s attorneys’ fees, instead leaving this matter to the Court’s discretion. Thus the Agreement merely provides that “Class Counsel shall receive an award in an amount approved by the Court, based upon the Gross Amount of money and benefits received by the Class and Claimants from all settlement funds....” (Agreement ¶ 8.1.) “ ‘Gross Amount’ as used in paragraph 8.1” is defined by the Agreement as “Copley’s maximum potential contribution to the settlement funds before any remittitur, i.e., $150,000,000.” (Agreement ¶ 3.19.) Private fee arrangements between claimants and non-class counsel are also addressed by the Agreement, which provides that “the Court shall reserve the power to set maximum limits on contingent fees, and [ ] the Court may make appropriate reductions on such contingent fee amounts for the cost of ‘common benefit’ services provided by Class Counsel.” (Agreement ¶ 8.3.)
*1409 While largely silent on the amount of the fees, the Agreement does explicitly address the allocation of fees. For Funds One, Two, and Three, the Agreement provides that each claimant meeting the fund’s criteria will receive an award “less his or her pro rata share of attorneys’ fees, costs, and administrative expenses.” (Agreement ¶¶ 5.3.1, 5.4.1, 5.5.1.) Further, the Agreement provides that the money in Fund Four will be used for payments to claimants and for “payment of attorneys fees, litigation costs and administrative costs.... ” (Agreement ¶ 5.6.5.)
The Supplement to the Agreement broadens the definition of “Claimant” to include “Additional Claimants,” or “those who timely requested exclusion from the class.” (Supp. Agreement ¶¶ 3.6, 9.6.) However, the Supplement explicitly provides that “[n]o deductions will be made from any amounts paid to such Claimants for their pro rata share of attorneys’ fees or litigation expenses awarded by the Court pursuant to paragraph 8.1.” (Supp. Agreement ¶ 9.6.3.)
The Agreement also addresses Defendant’s responsibilities regarding fees and expenses. The Agreement provides that “[i]f the total money paid from all settlement funds to Claimants and for attorneys’ fees, litigation costs and administrative expenses pursuant to section 8 of this Agreement is more than $65,000,000,” Defendant’s remitti-tur will be reduced by “an amount equal to each Claimants’ [sic] per capita share of attorneys’ fees, costs, and administrative expenses awarded or paid pursuant to section 8.... ” (Agreement ¶¶ 5.3.3(h), 5.4.3(h), 5.5.3(h).)
Discussion
The settlement in this case created a “common fund” from which the plaintiff class obtained a benefit. In a rare exception to the American rule that parties bear them own costs in litigation, “a litigant or 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,
Before considering the proper methodology for awarding attorneys’ fees out of a common fund, the Court feels compelled to define its role in these proсeedings. When an attorney makes a claim for fees from a common fund, his interest is “adverse to the interest of the class in obtaining recovery because the fees come out of the common fund set up for the benefit of the class.”
Rawlings v. Prudential-Bache Properties, Inc.,
The two competing methodologies for the award of attorneys’ fees from a common fund are the lodestar method and the percentage of the fund method. In the Tenth Circuit, following
Brown
and
Uselton v. Commercial Lovelace Motor Freight, Inc.,
Traditionally, attorneys’ fees in common fund cases were computed as a percentage of the fund, subject to considerations of reasonableness, and in every Supreme Court case that addressed the issue, the Court awarded attorneys’ fees on a percentage of the fund basis.
See, e.g., Sprague v. Ticonic Nat’l Bank,
This shift back towards the percentage of the fund method reflects its numerous advantages over the lodestar method. First, the percentage of the fund method will generally be less burdensome to administer in common fund cases than the lodestar method.
See, e.g., Swedish-Hosp.,
Second, the percentage of the fund method rewards efficiency, while the lodestar method rewards inefficiency. The lodestar method encourages attorneys to bill as many hours as possible, preferably to a firm’s most expensive attorneys, and discourages early settlement, even on terms favorable to plaintiffs, because the attorneys will earn more the longer a litigation lasts.
See
Third Circuit Task Force Report,
Third, the percentage of the fund approach helps to align more closely the interests of the attorneys with the interests of the parties,
see Swedish Hosp. Corp.,
Fourth, and finаlly, the percentage of the fund method better approximates the workings of the marketplace by focusing on the results achieved, and there is little apparent reason to treat common fund cases differently from how other similar eases are treated by the marketplace. As one district court noted, “[plaintiffs’ litigation practice, given the uncertainties and hazards of litigation, must necessarily be result-oriented. It matters little to the class how much the attorney spends in time or money to reach a successful result.”
Howes v. Atkins,
This is not to imply that the percentage оf the fund method is foolproof, or that it suffers from no disadvantages. For example, it may result in the overcompensation of counsel in situations where actions are resolved before counsel has invested significant time or resources. See Third Circuit Task Force Report,
The first step in a percentage of the fund analysis is a determination of the value of the fund. While disputed by the parties in this ease, the matter is settled by the explicit terms of the Agreement. The Agreement provides that “Class Counsel shall receive an award in an amount approved by the Court, based upon the Gross Amount of money and benefits received by the Class and Claimants from all settlement funds .... ” (Agreement ¶ 8.1 (emphasis added).) “ ‘Gross Amount’ as used in paragraph 8.1” is defined by the Agreement as “Copley’s maximum potential contribution to the settlement funds before any remittitur, i.e., $150,000,000.” (Agreement ¶ 3.19.) Thus the plain language of the Agreement supports a fee award based upon a common fund of $150 million.
Further, the remittitur provisions explicitly contemplate and provide a mechanism for payment of attorneys’ fees and expenses from the entirety of the fund. The Agreement provides that “[i]f the total money paid from all settlement funds to Claimants and for attorneys’ fees, litigation costs and administrative expenses pursuant to section 8 of this Agreement is more than $65,000,000,” Defendant’s remittitur will be reduced by “an amount equal to each Claimants’ per capita share of attorneys’ fees, costs, and administrative expenses awarded or paid pursuant to section 8.... ” (Agreement ¶¶ 5.3.3(h), 5.4.3(h), 5.5.3(h).) The total money paid from all settlement funds to all “Claimants,” which includes class and non-class claimants pursuant to the Supplement to the Agreement ¶ 3.6., will certainly exceed $65 million. 1 Thus the remittitur provisions of ¶¶ 5.3.3(h), 5.4.3.(ii), and 5.5.3(h) will kick in, providing a mechanism for and explicitly requiring the payment of attorneys’ fees from the entire fund, including those portions remitted to Defendant. While Defendant is correct in its characterization of the fund value as binary — being either $65 million or $150 million— the $65 million threshold will certainly be surpassed, thus the Court will award attorneys’ fees based on a common fund of $150 million.
The second step in a percentage of the fund analysis is an initial determination of the appropriate percentage to award. The standard contingency fee in individual actions is generally accepted to be 33%. In common fund eases, fees generally range from 20-30%,
see Camden I,
Newberg’s
Attorney Fee Aioards,
which analyzes the range of awards in common fund cases, emphasizes that when a common fund is extraordinarily large, the application of a benchmark or standard percentage may result in a fee that is unreasonably large for the benefits conferred.
See
Herbert P. Newberg,
Attorney Fee Awards
§ 2.09 (1986). Empirical research by New-berg and others reveals that courts are sensitive to this problem, reducing percentage awards as the size of the recovery increases.
See id.;
William J. Lynk,
The Courts and the Plaintiff’s Bar: Awarding the Attorney’s Fee in Class-Action Litigation,
23 J.Legal Stud. 185, 201 (1994);
see also
Third Circuit Task Force Report,
Having gained an initial indication that the appropriate percentage ranges from 6-10%, resulting in an award of $9-15 million, the Court must determine what percеntage within this range to apply, and whether the resulting award is reasonable. The
Johnson
factors, articulated by the Fifth Circuit in
Johnson v. Georgia Highway Express, Inc.,
Considering the relevant Johnson factors, and excluding those addressed elsewhere by the Court, the Court first notes that class counsel expended over 48,794.11 hours to reach the settlement of this litigation, clearly an enormous investment of time and energy. Further, the expedited nature of the litigation, with class certification, discovery, and forty-two days of trial all occurring within one year, required that class counsel focus almost exclusively on this litigation during that time period. This focused and diligent labor was also required because of the novelty and difficulty of the legal questions involved: not only was the certification of this class a complex question, but this was also the first and only mass tort class action to go to trial, and the case presented complex medical and scientific issues of causation (for example, the formation of biofilms, the endo-toxin response, the formation of colonies of pseudomonas, etc.). Thus, the skill required to perform the legal service presented by the instant casе was great, particularly where *1414 class counsel were faced with opposing counsel of such high quality.
While it is beyond dispute that class counsel are among the nation’s most experienced, reputable, and skilled plaintiffs attorneys, class counsel’s skill is further demonstrated by the result achieved. A settlement was reached that provided sufficient funds to afford relief to all claimants, potentially yielding $150 million to satisfy claims. This settlement provided relief a mere twenty-two months after the first Albuterol claims were filed, and did so in an inexpensive and efficient manner that allowed claimants to fore-go the burden of proving individual causation. This was an enormous victory for claimants, because the outcome of the trial was far from certain. Finally, the Court notes that the small size of most claims in the class made them particularly undesirable for most attorneys — class action was in many ways the only means of "redress for these claimants, requiring an enormous investment of time and resources with no guarantee that counsel would recoup most or any of this investment.
Thus, not only does the Court find that the combined weight of these factors indicates that an award at the upper end of the 6-10% range would be reasonable, but further, the Court believes that the combined weight of these factors militates in favor of an additional upward increase in the fee award. Therefore, the Court finds that an award of 13%, yielding a fee of $19.5 million, would be reasonable, largely because this case is sui gen-eris.
In an attempt to validate this award by confirming that it bears some relation to the work performed by counsel, the Court will perform a rough lodestar analysis. Taking all of counsel’s claimed hours (48,794.11) as legitimate, the proposed award of $19.5 million yields an hоurly rate of $400 for all attorney and paralegal work. 2 While this is obviously a highly lucrative hourly rate, the Court believes that it accurately reflects the merits of the work done by counsel, as demonstrated by the application of the Johnson factors. Looked at another way, this could be considered the $200 per hour fee used as a reference by class counsel 3 with a multiplier of 2, reflecting the contingent nature of the action and, albeit slightly, the quality work done by class counsel.
Under the
Lindy
lodestar methodology, a court may adjust the reasonable fee for the hourly work done by counsel to reflect the contingent nature of the litigation and the quality of the attorneys’ work.
See Lindy Bros. Builders, Inc. v. American Radiator & Standard Sanitary Corp.,
While counsel may be dissatisfied, having requested some $37.5 million in fees, a look at comparable cases indicates that the Court has been particularly generous.
See, e.g., Bowling v. Pfizer, Inc.,
Having found that class counsel should receive 13% of the fund as a fee, the Court must determine how the fee will be borne. Though this was a matter of some contention in the parties’ briefs and at the hearing on the fee award, there seems to be little reason (other than the enormous sums of money at stake) for the dispute. For Funds One, Two, and Three, the Agreement provides that each Claimant meeting the fund’s criteria will receive an award “less his or her pro rata share of attorneys’ fees, costs, and administrative expenses.” (Agreement ¶¶ 5.3.1, 5.4.1, 5.5.1.) The Agreement also provides that the money in Fund Four will be used for payments to Claimants and for “payment of attorneys fees, litigation costs and administrative costs.... ” (Agreement ¶ 5.6.5.) The Settlement Notice similarly provides that “[a]n amount which represents each claimant’s proportionate share of attorneys’ fees and litigation costs awarded by the Court and *1416 any administrative expenses incurred in connection with the settlement will be deducted from each claimant’s award.” (Settlement Notice, at 5-6 (emphasis added).) Thus each class claimant’s award will be reduced by the 13% fee award to class counsel. 5
Defendant’s remittitur will be similarly reduced by the 13% fee award to class counsel. As noted previously, the Agrеement provides that “[i]f the total money paid from all settlement funds to Claimants and for attorneys’ fees, litigation costs and administrative expenses pursuant to section 8 of this Agreement is more than $65,000,000,” Defendant’s remittitur will be reduced by “an amount equal to each Claimants’ per capita share of attorneys’ fees, costs, and administrative expenses awarded or paid pursuant to section 8.... ” (Agreement ¶¶ 5.3.3(ii), 5.4.3(h), 5.5.3(h).) This $65 million threshold is certain to be reached, thus Defendant’s remittitur will be reduced by 13%, an amount equal to each claimant’s per capita share of fees. The allocation of the fee award between the various firms and attorneys who made up class counsel is left to those parties.
See Howes v. Atkins,
The payment of attorneys’ fees by claimants is obviously standard practice under the American rule. However, the sharing of this burden by Defendant might in some sense appear to be fee shifting. As noted previously, this is permissible under
Boeing,
in which the Supreme Court concluded that attorneys for a class may recover a fee based on the entire fund created for the class, even if some class members make no claims against the fund so that money remains in the fund upon which defendant has a claim of right.
See Boeing,
There are also roughly 600 private attorneys in this case with separate contingency fee agreements with individual claimants. The Agreement provides that “the Court shall reserve the power to set maximum limits on contingent fees, and [] the Court may make appropriate reductions on such contingent fee amounts for the cost of ‘common benefit’ sеrvices provided by Class Counsel.” (Agreement ¶ 8.3.) Class counsel asked the Court to make a single percentage award for all attorneys’ fees, ostensibly levied against each claimant’s award, out of which class counsel would pay some indeterminate portion to the private attorneys. To do so, however, would result in an award to private attorneys borne in part by claimants who had received no services or benefit from the actions of the private attorneys, and would provide a windfall to those claimants on whose behalf the private attorneys labored. 6 Thus the Court finds that it is more *1417 equitable to reduce the private attorneys’ contingency fees to reflect the common benefit services provided by class counsel.
The Court has awarded class counsel a fee of Í3%, and could simply reduce proportionately the private attоrneys’ fees to reflect this award and the labor it represents. This percentage fee award, however, reflects the economies of scale inherent in large class actions, and should not provide a windfall to the private attorneys. If this had been a smaller fund, the Court would have awarded counsel roughly 25%, generally accepted as the benchmark award in common fund cases. This award would have left the private attorneys with less than one third of the standard contingency fee. This action, however, involves tort claims — claims that require individual counsel to participate in their investigation and presention,. unlike the securities claims often at issue in common fund cases. Thus a slight decrease in class counsel’s award, leaving the private attorneys with one third, would be justified. This allocation seems fair because there is no indication that the private attorneys were sufficiently involved to justify a substantially larger award: class counsel shouldered the vast majority of the burden in this case during discovery, at trial, and in the settlement negotiations and administration. Therefore, the Court will reduce private attorney contingency fees for Fund One, Two, and Three claimants by two thirds (leaving the private attorneys with one third) to reflect the common benefit services provided by class counsel. 7
The Court will also grant class counsel’s request for reimbursement of reasonable litigation expenses totaling $1,630,159.20. As noted in the Court’s discussion above, the Agreement provides that each claimant’s award and Defendant’s remittitur will be reduced by a pro rata share of litigation expenses. The Court accepts class counsel’s fee expenses not merely because they appear reasonable, particularly in light of the number' of hours expended by class counsel and the size of the fund recovered, but also because they have not been challenged by Defendant. While in most common fund cases the Court would not rely upon Defendant’s failure to challenge class counsel’s requested expenses, in the instant case, Defendant possesses an interest in limiting litigation expenses because it will pay an amount roughly equivalent to that borne by claimants.
These expenses will be deducted as 2% of each claimant’s award and Copley’s remitti-tur (thus 15% will be deducted for fees and expenses), creating a fund of $3 million with which the Special Master shall pay the expenses submitted by class counsel. The Special Master shall retain the excess for payment of further expenses, with any excess following resolution of all claims returned pro rata to Copley and clаss claimants. Finally, the interest (currently some $7 million) which has accrued for the benefit of the class, (Agreement ¶ 5.9.2), shall be retained by the Special Master until resolution of all claims, at which time it shall be disbursed pro rata to all class claimants. 8 .
*1418 Conclusion
Some may object that the fee awarded, even limited as the Court believes it is, is excessive or unwarranted. The Court is sensitive to the fact that there has been heightened criticism of the exorbitant fees awarded in some class actions. Class actions, however, cannot be analyzed within the same framework or judged by the same standards as conventional bipolar litigation. Because of the collective action problems associated with cases where individual claims are relatively small,
see
7A Charles A. Wright, Arthur R. Miller & Mary Kay Kane,
Federal Practice and Procedure
§ 1754, at 49;
see generally,
Mancur Olson,
The Logic of Collective Action
(1965), and the social desirability of many class suits, large fee awards may be necessary and desirable to motivate capable counsel to undertake class actions. This is particularly important in a case like this one, where the class is largely composed of negative value suits: the highest standard award provided by the settlement ($20,000) is certainly not enough to cover the expenditure required to prevail in a complex scientific case with novel issues of causation. As noted by the Supreme Court, “[wjhere it is not economically feasible to obtain relief within the traditional framework of a multiplicity of small individual suits for damages, persons may be without any effective redress unless they employ the class action device.”
Deposit Guaranty Nat’l Bank v. Roper,
Further, this class action settlement is not subject to many of the criticisms leveled against other class action settlements. By providing in the settlement agreement that the Court would set the amount of attorneys’ fees, the parties precluded the “danger ... that the lawyers might urge a class settlement at a low figure or on a less-than-optimal basis in exchange for red-carpet treatment for fees.”
Weinberger v. Great Northern Nekoosa Corp.,
Finally, the Court notes that while class counsel are rewarded handsomely, it is actually the claimants who have received a windfall: the standard contingency fee is 33%, thus the claimants have received class counsеl’s services at roughly one third of the market rate. The Court believes that this 13% fee award is reasonable, and not only reflects the quality work done by counsel and the unique aspects of this case, but also satisfies the Court’s fiduciary role and protects the interests of the claimants.
THEREFORE, it is hereby ORDERED that class counsel shall receive a fee award of 13% of the $150 million common fund created, for an award of $19.5 million, to be allocated amongst themselves by class counsel; and it is further
ORDERED that each class claimant’s award and Defendant’s remittitur shall be reduced by 13% for class counsel’s fee award and by a further 2% for payment of expenses; and it is further
ORDERED that each private attorney for a Fund One, Two, or Three claimant shall receive one third (1/3) of his or her bargained for contingency fee, while each private attorney for a Fund Four claimant shall receivе two thirds (2/3) of his or her bargained for contingency fee.
Notes
. While the payments have not yet exceeded $65,000,000, the figures available to the Court (including information that Defendant has requested the Court not to release publicly, even in summary form) indicate that payments to class and non-class claimants (i.e., the Jacoby & Meyers claimants) currently total close to $62,000,-000, with over one thousand four hundred claims unresolved, and over one thousand four hundred class claims preliminarily denied. Not only will a large percentage of the unresolved claims likely be approved, but pursuant to the Court's Order Regarding Interpretation of the Agreement, many of the class claims preliminarily denied by the Special Master will likely be approved upon reconsideration.
. By way of comparison, counsel's request for a fee of $37.5 million would be an hourly rate of $769 per hour. This would obviously be excessive.
See, e.g., Rosenbaum v. MacAllister,
. For purposes of this analysis, the Court will accept this hourly rate. While this figure somewhat exceeds the rate normally charged in Cheyenne, the Tenth Circuit permits an award based on higher-than-local rates where, as in the instant case, the party or parties are represented by out-of-town counsel whose rates are higher than those charged locally.
See Gottlieb v. Barry,
. The Supreme Court has rejected the use of multipliers to enhance the lodestar’s hourly rate amount in statutory fee-shifting cases,
see City of Burlington v. Dague,
. Non-class claimants will not share this burden. The Supplement to the Agreement provides that "[n]o deductions will be made from any amounts paid to [non-class] Claimants for their pro rata share of attorneys' fees or litigation expenses awarded by the Court pursuant to paragraph 8.1.” (Supp. Agreement ¶ 9.6.3.)
. A private attorney’s labor may have increased the amount of a claimant’s award, or the private attorney may have assisted with an appeal of the Special Master’s initial determination. In either instance, the private attorney’s work benefited an individual claimant rather than the class, thus that claimant should bear the cost of that attorney’s services.
. The Court recognizes that individual plaintiff's counsеl will have far more involvement in the resolution of wrongful death claims under Fund Four, thus these counsel should receive a greater percentage of their bargained for fees. However, class counsel should receive the 13% fee award as compensation for the creation of Fund Four. Thus the Court will reduce private attorney contingency fees for Fund Four by one third (leaving these attorneys with two thirds) to reflect the common benefit services provided by class counsel.
. The Court recognizes that these calculations may appear to have a Rube Goldberg quality. However, these mechanisms are necessary to respect the intent of the Agreement and to insure that the burden of the litigation costs is equitably shared. For example, while it would be far simpler to award the attorneys’ fees and expenses (at least in part) from the interest thаt has accrued on the fund, this would allow Defendant to escape (at least partially) its obligation to pay its portion of the fees and expenses. Thus the Court’s somewhat intricate calculations insure that only the class claimants benefit from the interest, as only they should under the Agreement, and forces Defendant to bear its full burden of fees and expenses, as it should under the Agreement. In yet another example, were the Court to decrease the contingency fee of each private attorney by an absolute figure (e.g., 22%), rather than awarding each private attorney 1/3 of his or her bargained for fee, those attorneys with low contingency fees (e.g., less than 22%) would receive nothing for their work. The Court believes that slightly easier calculations would not justify these inequitable results. The Court also notes that pro rata distribution amongst the claimants, or between the class and Defendant, is *1418 not so difficult as it might at first appear because of the standardized size of the awards and the funds.