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Fresno County Employees' Retirement Association v. Isaacson/Weaver Family Trust

United States Court of Appeals, Second Circuit

May 23, 2019

FRESNO COUNTY EMPLOYEES' RETIREMENT ASSOCIATION, Plaintiff-Appellee,
v.
ISAACSON/WEAVER FAMILY TRUST, Objector-Appellant. [1]

          Argued: November 15, 2018

          ERIC ALAN ISAACSON, La Jolla, CA, for Objector- Appellant.

          HANNAH G. ROSS, Bernstein Litowitz Berger & Grossmann LLP (Jai Chandrasekhar, on the brief), New York, NY, for Plaintiff-Appellee.

          Before: JACOBS, POOLER, and WESLEY, Circuit Judges.

          POOLER, CIRCUIT JUDGE

         The Isaacson/Weaver Family Trust appeals from the July 26, 2017, order of the United States District Court for the Southern District of New York (Alison J. Nathan, J.) granting Bernstein Litowitz Berger & Grossmann LLP's request for a percentage fee awarded from the common settlement fund. The fee award was compensation for the firm's representation of a class of plaintiffs that settled federal securities law claims against BioScrip, Inc. The Isaacson/Weaver Family Trust, a member of the class, objected to the fee award in the district court, arguing that the class's claims were brought pursuant to statutes containing fee- shifting provisions and therefore class counsel's fee award was presumptively limited to the unenhanced lodestar (counsel's hourly rate multiplied by the hours expended on the case). The district court found this objection unavailing and ruled that, because the parties' settlement agreement provided for class counsel to be compensated from a common settlement fund, class counsel was entitled to fees under the equitable common-fund doctrine rather than pursuant to a statutory fee-shifting provision. Under the common-fund doctrine, the district court held that a percentage fee award was appropriate.

         On appeal, we conclude that, regardless of whether the claims settled here were initiated under fee-shifting statutes, the common-fund doctrine properly controls the district court's allocation of attorneys' fees from a common settlement fund. This is because class plaintiffs have received the benefit of counsel's representation and assumption of the risk that the lawsuit will not render a recovery, and thus the class may be fairly charged for counsel's assumption of contingent risk. The district court was therefore entitled to exercise its discretion to award either a percentage-of-the-fund fee or a lodestar fee to class counsel. We offer no opinion as to whether the claims settled here were initiated under fee-shifting statutes. Accordingly, we AFFIRM the order of the district court.

         The objection of the Isaacson/Weaver Family Trust (the "Objector") to Bernstein Litowitz Berger & Grossmann LLP's fee award raises a novel issue of the proper principles for allocating fees awarded from a common-fund settlement. The Objector argues that, whenever an action is initiated under a statute with a fee-shifting provision, an attorney's fee is presumptively limited to the unenhanced lodestar fee, even if the action is settled by the creation of a common fund. Appellee argues that the contrary is true, claiming that, whenever an action is settled with the creation of a common fund, equitable principles permit the district court to award a fee that can be calculated using either the lodestar-fee method or a percentage-of-the-fund method. As Second Circuit case law has long implied, we hold that, even if a case is brought pursuant to a fee- shifting statute, common-fund principles control fee awards authorized from a common fund, and a common-fund fee award may be calculated as the lodestar or as a percentage of the common fund. In so holding, we recognize the acute difference between assessing a fee award against a defendant, who reaps no benefit from an action brought against him, and requiring class members to compensate counsel for representation that enriches the class. We AFFIRM the well-reasoned order of the district court finding that Bernstein Litowitz Berger & Grossmann LLP is entitled to its requested fee and expense award.

          BACKGROUND

         This case is collateral litigation arising from the June 16, 2016, settlement of a consolidated securities class action brought by shareholders of BioScrip, Inc. The district court appointed Fresno County Employees' Retirement Association as lead plaintiff and Bernstein Litowitz Berger & Grossmann LLP ("Lead Counsel") as lead counsel for the action. The class sought to recover for two allegedly material misrepresentations that BioScrip, Inc. made and brought an action under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934; Securities and Exchange Commission Rule 10b-5; and Sections 11, 12(a)(2), and 15 of the Securities Act of 1933.

         After the consolidated class-action complaint largely survived a motion to dismiss and the case entered discovery, the parties agreed to settle all of the aforementioned claims. The settlement called for the class-action defendants to pay $10, 900, 000 into a common fund in exchange for the class releasing all claims asserted against the defendants in the action. The settlement also provided that "Lead Counsel will apply to the Court for a collective award of attorneys' fees to Plaintiffs' Counsel to be paid solely from (and out of) the Settlement Fund." Stipulation & Agreement of Settlement at 20, ¶ 19, Faig v. BioScrip, Inc., No. 13-cv- 6922(AJN) (S.D.N.Y. Feb. 4, 2016), ECF No. 104-5. Thereafter, Lead Counsel moved for an award of attorneys' fees of 25% of the settlement fund, totaling $2, 725, 000 plus interest, and an expense award of $133, 565.28. Lead Counsel's requested fee award amounted to a 1.39 multiplier of the lodestar fee.

         The Isaacson/Weaver Family Trust filed an objection to Lead Counsel's requested award, arguing that Lead Counsel's award should be reduced to the lodestar amount. No other class member objected to the settlement agreement or the requested fee. The district court subsequently held a settlement fairness hearing where it heard argument on, among other things, Lead Counsel's fee request. In a thorough and discerning opinion, the district court found that Lead Counsel's requested fee was reasonable and granted the fee in full.

         DISCUSSION

         The parties primarily dispute the method by which a reasonable fee should be calculated when class counsel settles claims brought pursuant to statutes with fee-shifting provisions by establishing a common settlement fund. The Objector argues that, because the parties created the common fund to resolve claims based on statutes with fee-shifting provisions, the Supreme Court's fee- shifting jurisprudence applies, and Lead Counsel is presumptively entitled to only the unenhanced lodestar fee. Lead Counsel disagrees, arguing that the settlement that created the common fund resolved claims based on statutes that do not have applicable fee-shifting provisions, and regardless, the common-fund doctrine governs a district court's award of attorneys' fees when counsel has secured a settlement fund for the benefit of the class. We make clear today what has long been implicit in this Circuit's jurisprudence: regardless of whether a case is brought pursuant to a statute with a fee-shifting provision, if the ...


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