Can a securities class action be too easy to settle? The answer may be “yes,” if you are plaintiffs’ counsel and plan to request a significant fees award.
The Bristol-Myers securities class action filed in the S.D.N.Y. alleged violations of federal securities laws in connection with the company’s investment in and relationship with ImClone Systems and issues related to wholesaler inventory and sales incentives, the establishment of reserves, and accounting for certain asset and other sales. The case was settled in July 2004 for $300 million, even though the district court had previously dismissed the claims with prejudice (the decision was under appeal). A few days after the class action settlement, the company also settled a case brought by the SEC.
Plaintiffs’ counsel in the securities class action sought $22 million in legal fees (about 7.5% of the funds) as part of the settlement. Last week, however, Judge Preska cut that amount nearly in half, awarding plaintiffs’ counsel $12 million. According to a New York Law Journal article (via law.com – free regist. req’d) on the decision, the judge described the case as relatively low risk for plaintiffs’ counsel and noted that the “simultaneous settlement of the SEC action suggests that it was the Company’s desire, prompted by the SEC, to put its house in order that caused the settlement, not any action on the part of Lead Counsel.” This is the second case in the last six months where a court has significantly reduced a proposed fee award based on a determination that the case was low risk (see this post on the earlier decision).
Quote of note: “‘[I]t is not thirty times more difficult to settle a thirty million dollar case as it is to settle a one million dollar case,’ Southern District Judge Lorretta A. Preska wrote.”