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 ...