Fee objectors are becoming a more common feature in securities class action settlements and, in some cases, are getting results. The Elan securities litigation was settled last year for $75 million. Plaintiffs requested that their counsel be awarded attorneys’ fees of 20% of the settlement or $15 million. There were fifteen objectors to the proposed award, with two of the objectors presenting substantive grounds for their opposition.
In its decision (In re Elan Sec. Litig., 2005 WL 911444 (S.D.N.Y. April 20, 2005)), the court reduced the fee award to 12% of the settlement or $9 million. Notably, the court agreed with the fee objectors that the plaintiffs faced only a modest risk of dismissal at the outset of the case and that the plaintiffs’ attempt to use the hours worked by non-lead counsel to justify the size of the fee award should be rejected.
Quote of note: “Virtually all of Unappointed Counsel’s hours fall into two categories: (1) ‘Investigation, Initial Pleadings, Consolidated Complaint,’ and (2) ‘PSLRA Notice, Lead Plaintiff Motion.’ But Unappointed Counsel failed to segregate the hours devoted to investigation and/or preparation of the Consolidated Complaint and do not establish why they should be compensated for, among other things, seeking but failing to be appointed lead counsel.”