A few interesting lead plaintiff/lead counsel decisions from the end of last year (and one article).
(1) In In re Adelphia Comm. Corp. Sec. & Derivative Lit., 2008 WL 4128702 (Sept. 3, 2008) a law firm that did not act as lead counsel in the case moved for a third of the aggregate fee award. The law firm argued that it had provided “an independent and substantial benefit” for the class by initiating and preserving the Section 11 and Section 12 claims that ultimately were asserted against two of Adelphia’s underwriters. The court found no evidence, however, “that the use of those statutes, or their use against [the two underwriters], represents ground-breaking legal or factual analysis.” The law firm was awarded the amount that had been allocated by lead counsel – $155,610, or the time the law firm had invested in the case, at its normal hourly rates, up until the appointment of lead plaintiffs and counsel.
(2) A lead plaintiff cannot receive a disproportionate share of any settlement, but it can seek reimbursement for its costs and expenses. In In re Enron Corp. Sec., Derivative & “ERISA” Lit., 2008 WL 4178144 (Sept. 8, 2008), the court considered whether to reimburse the lead plaintiff for $600,000 in costs and expenses. The lead plaintiff argued that because one of its in-house counsel devoted an estimated 30% of his time to the case, it was forced to employ outside co-counsel on a number of matters. Accordingly, the lead plaintiff sought its costs for the in-house counsel’s time. Despite an objection that the lead plaintiff had failed to identify any “specific costs it was required to pay” because of its in-house counsel’s work on the litigation, the court granted the request.
(3) In Kuriakose v. Fed. Home Loan Mort. Co., 2008 WL 4974839 (Nov. 24, 2008), the Treasurer of the State of North Carolina moved on behalf of the North Carolina Retirement Systems to act as lead plaintiff in the case. Unfortunately for him, the North Carolina State Attorney General filed an opposition “on the ground that the Treasurer lacks authority under North Carolina law either to seek NCRS’s appointment as lead plaintiff or to retain counsel to represent NCRS in this litigation.” The court found that it would not “be in the class’s interest to have a lead plaintiff likely to become bogged down in state court litigation concerning its participation.”
Is there a better way to deal with the selection and compensation of lead plaintiff and lead counsel in securities class actions? The author of The 10b-5 Daily offered a few thoughts on the issue in a Class Action Watch article (Oct. 2008 edition).