Acknowledging the “exceptional result” achieved by the law firm of Schlichter Bogard & Denton in an excessive fee litigation involving Northrop Grumman, a federal judge has approved the fees in the “protracted, eleven-year battle between the litigants.”
The suit, filed in September 2006, had alleged that during the five-year period preceding spring 2006, the Northrop Grumman Stock Fund paid an average of $454,588.88 per year in investment management expenses, “even though that Fund’s singular investment directive is to invest in Northrop Grumman Corporation common stock.” The suit also alleged the investment management fees paid by the plan that covered approximately 210,000 current and former participants in the Northrop Grumman Savings Plan and Financial Security and Savings Program were “…excessive and unreasonable when compared to the market rate for institutional investment management and in light of the actual asset management services required and provided when compared to known and readily available alternatives.” Moreover, they charged that the administrative expenses of the plans that were paid by the plans and collected via asset-based charges to each of the plans’ investment options were for services provided to the Plans by Northrop employees and agents – and were allegedly excessive.
The parties struck a deal on a $16.75 million settlement in the case in June 2017. The case, filed in the U.S. District Court for the Central District of California, was one of two filed by the law firm of Schlichter Bogard & Denton against Northrop Grumman. (The second suit was unaffected by this settlement.)
Exceptional Result
U.S. District Court Judge Andre Birotte Jr. found that the $16.75 million settlement obtained by plaintiffs’ attorneys was an “exceptional” result, that it was about 70% of the class’ approximately $24 million total net loss, and – the court noted that even after “deducting the amount Class Counsel requests in fees, the settlement fund still represents around 40% of the class’ net loss” – an amount “only slightly less than Defendants’ claimed $10.5 million maximum exposure.”
Now, the court also noted that the settlement fund, as a percentage of recovery, was “greater than recoveries obtained in other cases where courts have awarded attorney fees of one-third of a common fund,” while concluding that “the exceptional result achieved in this action justifies an attorney fee award of one-third of the settlement fund.”
The 16-page order outlines the factors the court saw as justifying the award of attorney fees in the case, noting that “class counsel expended significant effort on behalf of the class in prosecuting this action,” some 26,000 hours of attorney, paralegal and law clerk time over the approximately 11 years the action has been pending, “drafted and filed three detailed complaints,” spent over a year researching the complex area of law and the issues relating to retirement plans, and “successfully appealed the Court’s denial of its motion for class certification to the Ninth Circuit, after which it obtained class certification on remand.” Moreover, the court noted that the plaintiffs’ attorneys “reviewed millions of pages of documents, took seventeen depositions, and prevailed on the tried claims at the summary judgment stage,” and participated in three unsuccessful mediations, after which it proceeded to prepare for trial. “Accordingly, because SBD exerted great effort on behalf of the class in litigating this action, the Court concludes an award of one-third of the settlement fund in attorney fees is justified.”
The court also cited that they were “highly experienced in representing plaintiffs in class action litigation, particularly ERISA class actions” has been “investigating and preparing 401(k) fiduciary breach cases for over ten years, was the first firm to bring a 401(k) ERISA fiduciary breach case, and has been named class counsel in numerous similar cases,” including the successful petition of “the United States Supreme Court to hear its first ERISA fiduciary breach case regarding excessive fees, and obtained 9-0 decision favorably interpreting ERISA’s statute of limitation,” as well as prevailing in “both of the two 401(k) fiduciary breach cases that have gone to judgment after trial,” all of which led the court here to conclude that their “…unique experience representing plaintiffs in ERISA class actions justifies an award of one-third of the settlement fund in attorney fees.”
Moreover, the court found that, having represented plaintiffs on a “completely contingent basis, plaintiffs’ attorneys “assumed great risk in litigating this action.”
The court noted that the law firm had been “in contact with 300 class members since the notice was mailed, and only four formal objections to the settlement have been filed with the Court,” and that only two of those four objected to the request for attorney fees. “The objections to the attorney fees generally complain that the amount SBD will receive in fees is large in comparison to the amount each class member will receive,” the court explained, and then said “Although true, the objectors provide no support for their arguments that SBD should receive a lesser amount in fees,” and that “the lack of significant objections to the requested fees justifies an award of one-third of the settlement fund” – $5,583,333 in attorney fees.
Expense Recoveries
Plaintiff’s attorneys sought a total of $1,159,114 in reimbursement of expenses:
- $49,026 for depositions
- $278,765 for experts and consultants
- $9,279 for filing, transcripts, subpoena services and related costs
- $27,986 for mediation and settlement costs
- $274,958 for copies, postage, phone and fax
- $330,152 for data development and document organization
- $22,667 for research and investigation
- $160,262 for travel, lodging and parking
- $6,018 in trial costs
Since during the course of this action, the firm reviewed more than 2.5 million pages of documents and took 17 depositions, attempted mediation three times prior to trial, and – those being unsuccessful – spent a week conducting its case-in-chief prior to settlement, continued settlement efforts during trial, and continued to negotiate details of the settlement for two months following the initial agreement, the court, citing “SBD’s efforts and the protracted nature of this case,” found that request to be reasonable.
Each of the named plaintiffs – Gary Grabek, Julie Spicer, Mark Geuder and Dwite Russell – were granted an inventive award of $25,000.
