A federal judge has trimmed the fees requested by plaintiffs’ attorneys in an excessive fee suit involving proprietary funds.
Terms of the settlement, struck after “more than two years of litigation, multiple dispositive and discovery motions, a contested class certification motion, complete document, deposition, and expert discovery” just a month before the issue[i]was set to go to trial, was for $13.85 million, plus an additional plan benefit consisting of an increased match from 75% to 85% for a period of three years, which the parties said in the settlement was anticipated to add $4.3 million annually to the plan through higher payments by Franklin (based on 2017 plan data).
Noting in her Oct. 4 order that the Settlement Agreement (a) confers substantial benefits on the Settlement Class, (b)benefits that are “immediate and readily quantifiable upon Judgment in the Action becoming Final,” that the class counsel “vigorously and effectively pursued the claims in this complex case on behalf of the Plaintiffs and the Class,” and that it (4) was “obtained as a direct result of Class Counsel’s advocacy, Judge Claudia A. Wilken nonetheless “clipped” the requested award of $7,490,000 – to $6,687,500.
The requested amount would have been 28% of the settlement amount ($13.85 million), but Judge Wilken noted that In the Ninth Circuit, the “usual range” for a percentage award of attorneys’ fees in a common fund case is 20-30%. While the request was within that range, and while the 25% fee she approved was lower than what had been requested (and, at least on a percentage basis, less than what other jurisdictions have approved in similar cases), she clearly felt that the plaintiffs’ counsel had earned it – noting that the “case carried significant risks, including novel risks related to the Named Plaintiffs (and other members of the Class) previously signing covenants not to sue Defendants.” She also cited “meaningful additional benefits beyond the immediate generation of a cash fund, including changes to the Plan with respect to the challenged investment options,” and that they had brought this “…as a contingent action and have not received any compensation to date.”
Hour ‘Class’
Judge Wilken also noted that “the reaction of the class and lodestar cross check justify a 25 percent award,” that the lodestar cross-check indicates that the 25% fee provides a lodestar multiplier of 2.21 – lower than the Plaintiff’s requested fee, which she explained had a lodestar multiplier 2.48x. A lodestar cross check is determined by multiplying the number of hours reasonably devoted to the case by a reasonable hourly rate – the latter may, of course, vary based on the geographical area, the nature of the services provided, and the experience of the attorneys. And, of course what’s deemed “reasonable.”
And indeed, Judge Wilken found the “rates and hours used to determine the lodestar multiplier to be reasonable given the relevant market and the complexities of ERISA class litigation such as this.” She also found that the request that they be reimbursed for the $473,882.01 in expenses they incurred in prosecuting the case to be reasonable, and the type that “would normally be charged to a fee-paying client.”
As for the named plaintiffs in the case – Marlon Cryer and Nelly Fernandez – Judge Wilken noted that they “expended substantial amounts of time and effort to protect the interests of the Class,” that “the Settlement is a direct result of Plaintiffs’ commitment,” and that they “risked alienation by peer and friends and reputational risk in having brought an action against their prior employer.” Oh, and Cryer “also willingly subjected himself to a deposition during the course of the litigation.” He’ll receive $15,000 as an award, while Fernandez will receive $10,000. The settlement agreement had requested 25,000 for Cryer and $15,000 for Fernandez.
[i]The suit was actually two separate suits brought by participants in Franklin Templeton’s 401(k) plan that were combined earlier this year. Lead plaintiffs Nelly Fernandez and Marlon H. Cryer had alleged similar fiduciary breach claims (and claims similar to those common to the recent wave of proprietary fund suits), including claims that the plan invested in funds offered and managed by Franklin Templeton, when “better-performing and lower-cost funds were available,” motivated to do so by the benefits to Franklin Templeton’s investment management business.
The suits had also alleged that the plan fiduciaries decided to replace allocation funds of the plan with target date funds shortly before or during 2014, at which time they chose the “untested, expensive Proprietary Target Date Funds” and criticized the plan for offering a proprietary money market fund rather than a stable value fund.
