MEMORANDUM OPINION ON MOTION FOR ATTORNEYS' FEES

LEWIS A. KAPLAN, District Judge.

In early 2011, following the unsealing of certain qui tam lawsuits,2 allegations emerged that Bank of New York Mellon ("BNYM") had overcharged certain of its custodial clients for foreign exchange services for over a decade. Several lawsuits followed, including, inter alia, customer class actions,3 ERISA class actions,4 cases brought by the Department of Justice5 and the New York Attorney General,6 false claims cases brought by certain California governmental subdivisions,7 and a securities class action brought on behalf of investors in BNYM common stock.8 The matter is before the Court on the motion of lead counsel in the securities class action, which recently settled for $180 million9 for an award of $45 million for attorneys' fees as well as reimbursement of approximately $1.6 million of litigation expenses.10

Background

On March 29, 2012, the Court appointed as co-lead plaintiffs: (1) the State of Oregon, by and through the Oregon State Treasurer on behalf of the Common School Fund, and (2) the Oregon Public Employee Retirement Board, on behalf of the Oregon Public Employee Retirement Fund (collectively, "Oregon").11 The Private Securities Litigation Reform Act ("PSLRA") certification that accompanied Oregon's motion for lead plaintiff was signed by the chief of staff of the Oregon State Treasurer.12 The Court approved also Oregon's selection of Bernstein Litowitz Berger & Grossman LLP ("BLBG") as lead counsel.13 Although BLBG was the only firm appointed lead counsel under the PSLRA, Oregon was represented also throughout this litigation by Stoll Berne Lokting & Shlachter, P.C. ("Stoll Berne"). Additional named plaintiffs who asserted claims under the 1933 Act were represented by Saxena White LLP ("Saxena White") (collectively, "securities counsel").14

As noted, lead counsel now move (on behalf of securities counsel) for an award of $45 million in attorneys' fees and reimbursement of $1,616,575.69 in litigation expenses.15 The application rests on reported expenditure of 118,867 hours on this litigation at a blended hourly rate of $394 — in other words, on a "lodestar" of $46.8 million. Thus, they seek a multiplier of 0.96 and fees which, if granted, would amount to 25 percent of the aggregate class recovery.16

The application is supported also by a declaration of Frederick M. Boss, Deputy Attorney General for the State of Oregon, stating both that (1) Oregon had negotiated fee agreements with BLBG and Stoll Berne "prior to retaining those firms" that permitted a fee award up to 25 percent of any settlement fund, and (2) "Oregon fully supports Lead Counsel's motion for an award of attorneys' fees and reimbursement of litigation expenses."17

The Court heard argument on the motion for attorneys' fees on October 20, 2015 and received a post-argument submission.18

Discussion

Courts in this circuit have broad discretion in evaluating the reasonableness of proposed attorneys' fees drawn from a common fund. They may rely on either the "percentage of the fund" or the "lodestar" method.19

This Court long has favored the lodestar approach20 in which a court "scrutinizes the fee petition to ascertain the number of hours reasonably billed to the class and then multiplies that figure by an appropriate hourly rate" to determine the lodestar.21 The Court then, in its discretion, may adjust the lodestar "by applying a multiplier" based on factors such as "the risk of the litigation and the performance of the attorneys" — that is, the six case-specific factors enumerated by the Second Circuit in Goldberger.22 In cases to which the PSLRA applies, however, there are additional considerations — considerations that explain the Oregon submissions.

In In re Cendant Corp. Litigation,23 the Third Circuit stated that "courts [in cases subject to the PSLRA] should accord a presumption of reasonableness to any fee request submitted pursuant to a retainer agreement that was entered into between a properly-selected lead plaintiff and a properly-selected lead counsel."24 Indeed, it held "that the presumption may be rebutted by a prima facie showing that the (properly submitted) retained agreement fee is clearly excessive" or by a substantial change in circumstances "that could not reasonably have been foreseen at the time of the original agreement."25 Accordingly, the submission of the Oregon materials in support of the fee agreement and application certainly is understandable notwithstanding that (1) the Third Circuit has backed away somewhat from the language in Cendant,26 (2) Cendant has not been adopted, at least explicitly, by the Second Circuit, which has "found nothing indicating a congressional intent for courts to consider the fees agreed upon by PSLRA lead plaintiffs as presumptively reasonable"27 and ultimately has "le[ft] open the question of how much weight should be given to fees agreed upon by PSLRA lead plaintiffs,"28 and (3) lead counsel during oral argument abandoned its reliance on the Cendant presumption. They instead took the position that the existence of its ex ante fee agreement with Oregon (and its endorsement of lead counsel's current fee application) are merely relevant factors the Court should consider when determining the reasonableness of a fee request.29 But the question of the weight to be given the ex ante fee arrangement between Oregon and lead counsel and Oregon's present support of the fee application remains — and it arises in circumstances that warrant some attention.

Cendant's conclusion with respect to the significance of ex ante fee agreements was not uncritical. That case and its progeny warned of pay-to-play arrangements — arrangements "where a law firm makes campaign contributions to elected officials who control governmental pension funds and is selected as the fund's lead counsel."30 Such arrangements suggest a conflict of interest on the part of a lead plaintiff between an official's interest in campaign contributions and its fiduciary duty to the class. Such a conflict could undermine the perhaps otherwise appropriate assumption that a lead plaintiff acts solely in the interests of the class in retaining and supporting fee applications by its chosen lead counsel.31 Moreover, even the appearance of such arrangements threatens to sap the legitimacy of the selection and compensation of lead counsel in PSLRA cases.32

This case raises concerns. Both BLBG and Stoll Berne made multiple contributions — as firms — to the campaigns of current or recent Oregon state treasurers and attorneys general. Most recently, BLBG, a New York based firm with no office closer to Oregon than San Diego, California, donated $2,000 to the reelection campaign of the current Oregon attorney general on August 16, 2015,33 less than one month before Oregon's deputy attorney general submitted his declaration to this Court stating that Oregon "fully supports" BLBG's motion for attorneys' fees.

The Court recognizes that Stoll Berne's main office is in Oregon. Some of the contributions appear to have been relatively modest and, in some instances, were made some time ago.34 Both BLBG and Stoll Berne assert that there was no ulterior motive for their campaign contributions.35 Deputy Attorney General Boss, moreover, asserts that he — not an elected official — "was the individual who selected Stoll Berne and BLBG to represent Oregon in this case" and that "[n]either [his] selection of counsel in this case nor [his] execution of the fee agreement was impacted in any way by any campaign contributions that may have been made to any elected official by either BLBG or Stoll Berne."36

There is no evidence before the Court that draws these assertions into question. Nor do defendants have any incentive to quarrel with the proposed fee, as they have no economic interest in how the $180 million settlement is divided among the class and the lawyers.37 In the last analysis, however, it is unnecessary to decide what might be warranted in comparable circumstances if the question whether to approve the fee request were a close call or depended in any material way on the existence of the fee agreement and/or the endorsement of the lead plaintiff.

In this case, the Court is entirely satisfied that the Goldberger factors support the proposed award without regard to the fee agreements or Oregon's position. There is no reason to question the hours devoted by the lawyers to this very hard fought case. The blended hourly rate is reasonable. The multiplier is appropriate.38 All things (save the fee agreements and the position of the lead plaintiffs) considered, the Court concludes that the requested fee is reasonable and that the expenses should be reimbursed. The Court notes only that it might have been preferable if lawyers had acted differently in dealing with these public officials and candidates for these public offices.

Conclusion

For the foregoing reasons, the motion to approve the requested attorneys' fees and expenses [12 MD 2335 DI 631, 11-cv-9175 01274] is granted. A separate order embodying this ruling will enter.

SO ORDERED.