United States District Court, D. Massachusetts
ARKANSAS TEACHER RETIREMENT SYSTEM, on behalf of itself and all others similarly situated, Plaintiff
STATE STREET BANK AND TRUST COMPANY, Defendants. ARNOLD HENRIQUEZ, MICHAEL T. COHN, WILLIAM R. TAYLOR, RICHARD A. SUTHERLAND, and those similarly situated, Plaintiff
STATE STREET BANK AND TRUST COMPANY, Defendants. THE ANDOVER COMPANIES EMPLOYEE SAVINGS AND PROFIT SHARING PLAN, on behalf of itself, and JAMES PEHOUSHEK-STANGELAND and all others similarly situated, Plaintiff
STATE STREET BANK AND TRUST COMPANY, Defendants.
MEMORANDUM AND ORDER
L. WOLF UNITED STATES DISTRICT JUDGE
have arisen with regard to the accuracy and reliability of
information submitted by plaintiffs' counsel on which the
court relied, among other things, in deciding that it was
reasonable to award them almost $75, 000, 000 in
attorneys' fees and more than $1, 250, 000 in expenses.
The court now proposes to appoint former United States
District Judge Gerald Rosen as a special master to
investigate those issues and prepare a Report and
Recommendation for the court concerning them. After providing
plaintiffs' counsel an opportunity to object and be
heard, the court would decide whether the original award of
attorneys' fees remains reasonable, whether it should be
reduced, and, if misconduct has been demonstrated, whether
sanctions should be imposed.
court is now, among other things, providing plaintiffs'
counsel the opportunity to consent or to object to: the
appointment of a special master generally; to the appointment
of Judge Rosen particularly; and to the proposed terms of any
appointment. A hearing to address the possible appointment of
a special master will be held on March 7, 2017, at 10:00 a.m.
hearing on November 2, 2016, the court approved a $300, 000,
000 settlement in this class action in which it was alleged
that defendant State Street Bank and Trust overcharged its
customers in connection with certain foreign exchange
transactions. It also employed the "common fund"
method to determine the amount of attorneys' fees to
award. See In re Thirteen Appeals Arising Out of
San Juan Dupont Plaza Hotel Fire Litig., 56 F.3d 295,
305 (1st Cir. 1995). The court found to be reasonable an
award to class counsel of $74, 541, 250 in attorneys'
fees and $1, 257, 697.94 in expenses. That award represented
about 25% of the common fund.
many judges, and consistent with this court's long
practice, the court tested the reasonableness of the
requested award, in part, by measuring it against what the
nine law firms representing plaintiffs stated was their total
"lodestar" of $41, 323, 895.75. See Nov.
2, 2016 Transcript ("Tr.") at 30-31, 34; see
also Manual for Complex Litigation (Fourth) §
14.122 (2004) ("the lodestar is . . . useful as a
cross-check on the percentage method" of determining
reasonable attorneys' fees); Vizcaino v. Microsoft
Corp., 290 F.3d 1043, 1050 (9th Cir. 2002) ("[T]he
lodestar may provide a useful perspective on the
reasonableness of a given percentage award.").
Plaintiffs' counsel represented that the total requested
award involved a multiplier of $1.8%, which they argued was
reasonable in view of the risk they undertook in taking this
case on a contingent fee. See Memorandum of Law in
Support of Lead Counsel's Motion for an Award of
Attorneys' Fees (Docket No. 103-1) at 24-25 ("Fees
lodestar is properly calculated by multiplying the number of
hours reasonably expended on the litigation by a reasonable
hourly rate. See Blum v. Stenson, 465 U.S. 886, 889
(1984). The Supreme Court has instructed that
"[r]easonable fees . . . are to be calculated according
to the prevailing rates in the relevant community."
Id. at 895. "[T]he rate that private counsel
actually charges for her services, while not
conclusive, is a reliable indicum of market value."
United States v. One Star Class Sloop Sailboat built in
1930 with hull no. 721, named "Flash II", 546
F.3d 26, 40 (1st Cir. 2008)(emphasis added).
their memorandum in support of the fee request,
plaintiffs' counsel represented that to calculate the
lodestar they had used "current rather than historical
billing rates, " for attorneys working on this case.
Fees Award Memo. (Docket No. 103-1) at 24. Similarly, in the
related affidavits filed on behalf of each law firm counsel
stated that "the hourly rates for the attorneys and
professional support staff in my firm . . . are the same as
my firm's regular rates charged for their services . . .
." See, e.g., Declaration of Garett J. Bradley
on behalf of Thornton Law Firm LLP ("Thornton")
(Docket No. 104-16) at ¶4; Declaration of Lawrence A.
Sucharow on behalf of Labaton Sucharow LLP
("Labaton") (Docket No. 104-15) at ¶7. In view
of the well-established jurisprudence and the representations
of counsel, the court understood that in calculating the
lodestar plaintiffs' law firms had used the rates they
each customarily actually charged paying clients for the
services of each attorney and were representing that those
rates were comparable to those actually charged by other
attorneys to their clients for similar services in their
November 10, 2016, David J. Goldsmith of Labaton, on behalf
of plaintiffs' counsel, filed the letter attached hereto
as Exhibit A (Docket No. 116). Mr. Goldsmith noted that the
court had used the lodestar calculated by counsel as a check
concerning the reasonableness of the percentage of the common
fund requested for attorneys' fees. Id. at 3,
n.4. Counsel stated that as a result of an "inquiry from
the media" "inadvertent errors [had] just been
discovered in certain written submissions from Labaton
Sucharow LLP, Thornton Law Firm LLP, and Lieff Cabraser
Heiman & Bernstein LLP supporting Lead Counsel's
motion for attorneys' fees . . . ." Id. at
1. Counsel reported that the hours of certain staff
attorneys, who were paid by the hour primarily to review
documents, had been included in the lodestar reports of more
than one firm. Id. at 1-2. He also stated that in
some cases different billing rates had been attributed to
particular staff attorneys by different firms. Id.
double-counting resulted in inflating the number of hours
worked by more than 9, 300 and inflating the total lodestar
by more than $4, 000, 000. Id. at 2-3. As a result,
counsel stated a multiplier of 2, rather than 1.8, should
have been used to test the reasonableness of the request for
an award of $74, 541, 250 as attorneys' fees.
Id. at 3. Counsel asserted that the award
nevertheless remained reasonable and should not be reduced.
Id. The letter did not indicate that the reported
lodestar may not have been based on what plaintiffs'
counsel, or others in their community, actually customarily
charged paying clients for the type of work done by the staff
attorneys in this case. Nor did the letter raise any question
concerning the reliability of the representations concerning
the number of hours each attorney reportedly worked on this
questions, among others, have now been raised by the December
17, 2016 Boston Globe article headlined
"Critics hit law firms' bills after class action
lawsuits" which is attached as Exhibit B. For example,
the article reports that the staff attorneys involved in this
case were typically paid $25-$40 an hour. In calculating the
lodestar, it was represented to the court that the regular
hourly billing rates for the staff attorneys were much higher
-- for example, $425 for Thornton, see Docket No.
104-15 at 7-8 of 14, and $325-440 for Labaton, see
Docket No. 104-15 at 7-8 of 52. A representative of Labaton
reportedly confirmed the accuracy of the article in this
respect. See Ex. B at 3.
court now questions whether the hourly rates plaintiffs'
counsel attributed to the staff attorneys in calculating the
lodestar are, as represented, what these firms actually
charged for their services or what other lawyers in their
community charge paying clients for similar services. This
concern is enhanced by the fact that different firms
represented that they customarily charged clients for the
same lawyer at different rates. In general, the court wonders
whether paying clients customarily agreed to pay, and
actually paid, an hourly rate for staff attorneys that is
about ten times more than the hourly cost, before overhead,
to the law firms representing plaintiffs.
addition, the article raises questions concerning whether the
hours reportedly worked by plaintiffs' attorneys were
actually worked. Most prominently, the article accurately
states that Michael Bradley, the brother of Thornton Managing
Partner Garrett Bradley, was represented to the court as a
staff attorney who worked 406.40 hours on this case.
See Docket No. 104-15 at 7 of 14. Garrett Bradley
also represented that the regular rate charged for his
brother's services was $500 an hour. Id. However
the article states, without reported contradiction, that
"Michael Bradley . . . normally works alone, often
making $53 an hour as a court appointed defendant in [the]
Quincy [Massachusetts] District Court." Ex. B at 1.
These apparent facts cause the court to be concerned about
whether Michael Bradley actually worked more than 400 hours
on this case and about whether Thornton actually regularly
charged paying clients $500 an hour for his services.
acknowledged double-counting of hours by staff attorneys and
the matters discussed in the article raise broader questions
about the accuracy and reliability of the representations
plaintiffs' counsel made in their calculation of the
lodestar generally. These questions -- which at this time are
only questions -- also now cause the court to be concerned
about whether the award of almost $75, 000, 000 in
attorneys' fees was reasonable.
THE PROPOSED SPECIAL MASTER
of the foregoing, the court proposes to appoint a special
master to investigate and report concerning the accuracy and
reliability of the representations that were made in
connection with the request for an award of attorneys'
fees and expenses, the reasonableness of the award of $74,
541, 250 in attorneys' fees and $1, 257, 697.94 in
expenses, and any related issues that may emerge in the
special master's investigation. In the final judgment
entered on November 11, 2016, the court retained jurisdiction
over, among other things, the determination of attorneys'
fees and other matters related or ancillary to them.
See Final Judgment (Docket No. 110) at 10. Federal
Rule of Civil Procedure 23(h)(4) states that in class actions
"the court may refer issues related to the amount of the
[attorneys' fee] award to a special master . . . as
provided in Rule 54(d)(2)(D)." Federal Rule of Civil
Procedure 54(d)(2)(D) states that "the court may refer
issues concerning the value of services to a special master
under Rule 53 without regard to the limitations of Rule
53(a)(1)." As the 1993 Advisory Committee's Note
explains, "the rule  explicitly permits . . . the
court to refer issues regarding the amount of a fee award in
a particular case to a master under Rule 53. . . . This
authorization eliminates any controversy as to whether such
references are permitted . . . ." Fed.R.Civ.P. 54
Advisory Committee's Note to 1993 Amendment.
court proposes to exercise this authority to appoint Gerald
Rosen, a recently retired United States District Judge for
the Eastern District of Michigan, to serve as special master;
Judge Rosen's biography is attached as Exhibit C. The
court proposes to authorize Judge Rosen to investigate all
issues relating to the award of attorneys' fees in this
case. If appointed, he would be empowered to, among other
things, subpoena documents from plaintiffs' counsel and
third parties, interview witnesses, and take testimony under
oath. Judge Rosen would be authorized to communicate with the
court ex parte on procedural matters, but encouraged
to minimize ex parte communications, and to avoid
them if possible. He would be expected to complete his duties
within six-months of his appointment, if possible.
conclusion of his investigation, Judge Rosen would prepare
for the court a Report and Recommendation concerning: (1) the
accuracy and reliability of the representations made by
plaintiffs' counsel in their request for an award of
attorneys' fees and expenses, including, but not limited
to, whether counsel employed the correct legal standards and
had proper factual bases for what they represented to be the
lodestar for each firm and the total lodestar; (2) the
reasonableness of the amount of attorneys' fees and
expenses that were awarded, including whether they should be
reduced; and (3) whether any misconduct occurred; and, if so,
(4) whether it should be sanctioned, see, e.g.,
In re: Deepwater Horizon, 824 F.3d 571, 576-77 (5th
Cir. 2016). The court would provide plaintiffs' counsel
an opportunity to object to the Report and Recommendation
and, if appropriate, conduct a hearing concerning any
objections. See Fed. R. Civ. Proc. 53(f)(1). The
special master's report would be reviewed pursuant to
Federal Rule of Civil Procedure 53(f)(3), (4) & (5).
Rosen would be compensated at his regular hourly rate as a
member of JAMS of $800 an hour or $11, 000 a
Judge Rosen could be assisted by other attorneys and staff,
who would be compensated at a reasonable rate approved in
advance by the court. Judge Rosen and anyone assisting him
would also be reimbursed for their reasonable expenses.
fees and expenses of the Special Master would be paid, by the
court, from the $74, 541, 250 awarded to plaintiffs'
counsel. The court may order that up to $2, 000, 000 be
returned to the Clerk of the District Court for this purpose.
required by Federal Rule of Civil Procedure 53(b)(3)(A),
Judge Rosen has submitted an affidavit disclosing whether
there is any ground for his disqualification under 28 U.S.C.
§455, which is attached as Exhibit D. The only matter
disclosed relates to Elizabeth Cabraser, a partner in one of
plaintiffs' law firms. Ms. Cabraser reportedly worked
29.50 hours on this case. Judge Rosen reports that about four
years ago he asked Ms. Cabraser to become, with him and
others, a co-author of the book Federal Employment
Litigation. Since then they have had annually,
independently submitted updates to different chapters of the
book. They, and the other authors, share royalties from the
book. In addition, Judge Rosen and Ms. Cabraser have
participated together on panels on class actions. Although at
least one lawyer from plaintiffs' law firms has appeared
before Judge Rosen, Judge Rosen has had no other association
with any of them.
Rosen represents that he has no bias or prejudice concerning
anyone involved in this matter, or any personal knowledge of
potentially disputed facts concerning it. Therefore, it does
not appear that his disqualification would be required by 28
U.S.C. §455(b)(1). It also appears to Judge Rosen and
the court that his relationship with Ms. Cabraser could not
cause a reasonable person to question his impartiality.
Therefore, it appears that his recusal would not be justified
pursuant to §455(a). See United States v.
Sampson, 12 F.Supp.3d 203, 205-08 (D. Mass. 2014) (Wolf,
D.J.) (discussing standards for recusal under
the court is providing plaintiffs' counsel the
opportunity to consent to the appointment of Judge Rosen as
special master on the terms discussed in this Memorandum,
register any objections, and/or comment on the proposal.
Among other things, plaintiffs' counsel may propose
alternative eligible candidates for possible appointment.
See Fed.R.Civ.P. 53(b)(1).
of the foregoing it is hereby ORDERED that:
Plaintiffs' counsel shall file by February 20, 2017, a
memorandum addressing, among other things deemed relevant:
whether they object to the appointment of a special master;
whether they object to the selection of Judge Rosen if a
special master is to be appointed; whether they believe Judge
Rosen's disqualification would be required under 28
U.S.C. § 455(a) or (b) and, in any event, whether they
waive any such ground for disqualification; whether they
object to any of the terms of the appointment and powers of a
special master discussed in this Memorandum; and whether they
propose the appointment of someone other than Judge Rosen as
special master. Counsel shall provide an explanation, with
supporting authority, for any objection or comment.
hearing to address the proposed appointment of a special
master generally, and Judge Rosen particularly, shall be held
on March 7, 2017, at 10:00 a.m. Each of plaintiffs'
counsel who submitted an affidavit in support of the request
for an award of attorney's fees, see Docket Nos.
104-15 - 104-24, shall attend.Michael Bradley shall also attend.
In addition the representative of each lead plaintiff who
supervised this litigation (not a lawyer) shall
Rosen shall also be present and may be questioned. Regardless
of whether Judge Rosen is appointed special master, the court
will order that he receive reasonable compensation for his
time and expenses from the fee award previously made to
writing respectfully to advise the Court of inadvertent
errors just discovered in certain written submissions from
Labaton Sucharow LLP, Thornton Law Firm LLP, and Lieff
Cabraser Heimann & Bernstein LLP supporting Lead
Counsel's motion for attorneys' fees, which the Court
granted following the fairness hearing held on November 2,
2016. See Order Awarding Attorneys' Fees, Payment of
Litigation Expenses, and Payment of Service Awards to
Plaintiffs ("Fee Order, " ECF No. 111).
mistakes came to our attention during internal reviews that
were conducted in response to an inquiry from the media
received after the hearing. The purpose of this letter is to
disclose the error and provide a corrected lodestar and
multiplier. We respectfully submit that the error should have
no impact on the Court's ruling on attorneys' fees.
Court is aware, the submissions supporting Lead Counsel's
fee application included individual declarations submitted on
behalf of Labaton Sucharow, Thornton, and Lieff Cabraser,
reporting each firm's lodestar and number of hours
billed. See ECF Nos. 104-15, at 7-9; 104-16, at 7-8; 104-17,
at 8-9; see also ECF No. 104-24 (Master Chart).
professionals and paraprofessionals listed in these
firms' respective lodestar reports include persons
denoted as Staff Attorneys, or "SAs." SAs are
bar-admitted, experienced attorneys hired on a temporary,
though generally long-term, basis, and are paid by the hour.
The SAs in this action Labaton Sucharow Hon. Mark L. Wolf
United States District Judge November 10, 2016 Page 2 were
tasked principally with reviewing and analyzing the millions
of pages of documents produced by State Street.
(17) of the SAs listed on the Thornton lodestar report are
also listed as SAs on the Labaton Sucharow lodestar
report. Six (6) of the SAs listed on the Thornton
lodestar report are also listed as SAs on the Lieff Cabraser
lodestar report. Both sets of overlap reflect the fact that
as the litigation proceeded, efforts were made to share costs
among counsel, such that financial responsibility for certain
SAs located at Labaton Sucharow's and Lieff
Cabraser's offices was borne by Thornton.
now determined that:
• The hours of the Alper SAs reported in the Thornton
lodestar report mistakenly were also reported in the Labaton
Sucharow lodestar report.
• Certain hours reported by one of the Alper SAs (S.
Dolben) in the Thornton lodestar report mistakenly duplicated
certain hours of another Alper SA (D. Fouchong).
• A portion of the hours of two of the Jordan SAs
reported in the Thornton lodestar report (C. Jordan and J.
Zaul) mistakenly were also reported in the Lieff Cabraser
• The hours of two other Jordan SAs (A. Ten Eyck and R.
Wintterle) mistakenly were included in the Lieff Cabraser
of these inadvertent errors, Plaintiffs' Counsel's
reported combined lodestar of $41, 323, 895.75, and reported
combined time of 86, 113.7 hours, ...