KPMG’s settlement of the claims against it in the Rite Aid litigation has given rise to an interesting battle over attorneys’ fees. In an opinion that came out two months ago, the U.S. Court of Appeals for the Third Circuit held that the district court should reconsider its fee award of $31 million (25% of the settlement). The Third Circuit found that although the district court correctly applied the percentage-of-recovery approach, it erred in its application of a lodestar ‘crosscheck’ by focusing only on the hourly rates for the top lawyers handling the case, making the fee award appear more reasonable.
On remand, however, the district court has once again awarded plaintiffs’ counsel $31 million in fees. See In re Rite Aid Corp. Sec. Litig., 2005 WL 697461 (E.D. Pa. March 24, 2005). Although the district court conceded that the new calculation increased the lodestar mutliplier from 4.07 to 6.96 (i.e., plaintiffs’ counsel will receive nearly 7 times the amount that they would have been paid if they had worked on an hourly basis), it nevertheless found that the award was still reasonable. In its decision, the district court noted that the “case appears to involve the largest class recovery on record against an auditor in a 10b-5 action, a fact no one at the hearing contested.” Moreover, the settlement was achieved “without relying on the fruits of any official investigation.”
The Legal Intelligencer has an article (via law.com – free regist. req’d) on the decision.