Professor Michael Perino, author of the leading treatise on the PSLRA, has published an empirical study of attorneys’ fees in securities class actions. The paper is entitled “Markets and Monitors: The Impact of Competition and Experience on Attorneys’ Fees in Securities Class Actions.” Perino finds that the participation of a public pension fund as a lead plaintiff is correlated with lower attorneys’ fees requests and awards. By contrast, there is no statistically significant correlation associated with the participation of a union pension fund, the other type of institutional investor examined by the study. Court auctions of the lead counsel role result in significantly lower attorneys’ fees. In addition, the participation of repeat players (either courts that are more experienced handling securities class actions or institutional objectors) are correlated with lower attorneys’ fees.
Quote of note: “These findings suggest four basic policy responses. First, because the fee arrangements that public pension funds negotiate appear to be the product of at least some competitive bargaining, courts should look to those arrangements as guidelines for awarding fees in cases without institutional investors. Second, to obtain the benefits of judicial experience in fee awards, courts with comparatively little experience in handling securities class actions should look to the fees that more experienced courts award, a process that will be facilitated by making award decisions (which are predominantly unreported) more widely available. Third, policy should continue to encourage institutions, most particularly public pension funds, to serve as lead plaintiffs and to encourage institutions to monitor fee requests and object to those that are excessive. Finally, courts should continue to experiment with auctioning the role of lead counsel in those cases in which the available lead plaintiffs do not appear to have used competition or otherwise to have engaged in arm’s length bargaining to select class counsel.”