In re GSE Bonds Antitrust Litigation

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK

IN RE GSE BONDS ANTITRUST 19-cv-1704 (JSR)

LITIGATION

MEMORANDUM AND ORDER

JED S. RAKOFF, U.S.D.J.

Between October 2019 and February 2020, the Court

preliminarily approved five separate settlements between

plaintiffs and defendants in the above-captioned action. The

settlements were between plaintiffs and 1) Deutsche Bank

Securities, Inc. (“DB Settlement”); 2) First Tennessee Bank,

N.A. and FTN Financial Securities Corp. (“FTN Settlement”); 3)

Goldman Sachs (“GS Settlement”); 4) Barclays Capital, Inc.

(“Barclays Settlement”); and 5) all remaining defendants

(“Global Settlement”). The parties now seek final approval of

the same settlements. Furthermore, Co-Lead Counsel, Scott+Scott

Attorneys at Law LLP (“Scott+Scott”) and Lowey Dannenberg, P.C.

(“Lowey”), move for an award of attorneys’ fees and payments of

litigation expenses in connection with their representation of

the settlement class.’ Finally, named plaintiffs City of

1 Included in the fees Co-Lead Counsel seek are fees and expenses

incurred by Berman Tabacco (“Berman”) and Korein Tillery LLC

(“Korein”). Berman and Korein contributed work on behalf of the

settlement class prior to Co-Lead Counsel’s appointment, and

Berman continued its representation of class representative

Birmingham Retirement and Relief System (“Birmingham”),

Electrical Workers Pension System Local 103, I.B.E.W. and Local

103, I.B.E.W. Health Benefit Plan (together, “I.B.E.W.”), and

Joseph Torsella, in his official capacity as Treasurer of the

Commonwealth of Pennsylvania (“Pennsylvania Treasury”), move for

awards for their service as class representatives in this

Action. For the reasons set forth below, the Court grants each

motion.

I.   Motions for Approval of Settlements

In order to grant final approval of a proposed settlement

under Federal Rule of Civil Procedure 23(e)(2), the Court must

find “that it is fair, reasonable, and adequate.” The Court

considers a number of factors laid out in Rule 23(e)(2), as well

as in City of Detroit v. Grinnell Corp., 495 F.2d 448, 463 (2d

Cir. 1974), to determine whether this standard has been met. The

Court in its opinion and orders providing the basis for its

preliminary approval of the five settlements has already

explained in detail why the Rule 23 and Grinnell factors support

approval of each of the settlements. See ECF Nos. 298, 339, 364,

367 (collectively “preliminary approval orders”). The Court re-

adopts that analysis here, and limits its focus to those few

Electrical Workers Pension Fund Local 103, I.B.E.W. and Local

103, I.B.E.W. Health Benefit Plan (collectively, “I.B.E.W.”)

throughout the Action.

developments since the time of the preliminary approvals that

impact that analysis. Because these subsequent developments only

further support the fairness, reasonableness, and adequacy of

the settlements, the Court gives its final approval to all five

settlements.

a.  The Terms of Any Proposed Award of Attorneys’ Fees

Rule 23(e)(2)(C)(iii) requires courts to examine “the terms

of any proposed award of attorneys’ fees, including timing of

payment” as part of its adequacy assessment. At the preliminary

approval stage, Co-Lead Counsel represented that they would

apply for attorneys’ fees not to exceed 26% of the settlement

fund for the DB and FTN Settlements and 22% for the remaining

three settlements. Co-Lead Counsel now seek a fee of 20% for all

settlements. While none of the prior estimates were in any way

binding on the Court, they were facially reasonable. Therefore,

the lower requested attorneys’ fees is a development that favors

approval.

b.  Range of Reasonableness of the Settlement Fund in Light

of the Best Possible Recovery and Attendant Risks of

Litigation

The Court’s most substantial concern with any of the

settlements at the preliminary approval stage was whether the

FTN Settlement provided an adequate recovery for plaintiffs. See

Opinion and Order at 16-19, ECF No. 298 (“FTN and DB Order”).

Based on automatic trebled damages, the Court found that the

$14.5 million settlement amount represented 6% to 12% of the

best possible recovery. Id. at 18-19. The Court found that this

small settlement percentage meant that Grinnell factor 8, “the

range of reasonableness of the settlement in light of the best

possible recovery,” and Grinnell factor 9, “the range of

reasonableness of the settlement fund to a possible recovery in

light of all the attendant risks of litigation,” weighed against

preliminary approval (though it was overcome by other factors).

In making that assessment, however, the Court expressly did not

credit the value of FTN’s cooperation with the plaintiffs,

because this cooperation was contingent on preliminary approval

and thus had not yet come to fruition. Since preliminary

approval, FTN has followed through on its promise of

cooperation, adding value to the settlement. See Memorandum of

Law in Support of Mot. for Final Approval of Class Action

Settlements with DB, FTN, and GS (“Mem. DB, FTN, and GS”) at 17-

18, ECF No. 348. This material cooperation supports the adequacy

of the FTN settlement, favoring final approval.

c.  Reaction of the Settlement Class

While the Court addressed most of the Grinnell factors in

its various preliminary approval orders, final approval of the

settlements requires the Court to assess for the first time

Grinnell factor 2, “the reaction of the class to the

settlement.” Grinnell, 495 F.2d at 463. “A favorable reception

by the class constitutes ‘strong evidence’ that a proposed

settlement is fair.” In re Citigroup Inc. Sec. Litig., 965 F.

Supp. 2d 369, 382 (S.D.N.Y. 2013). Thus,“[i]f only a small

number of objections are received, that fact can be viewed as

indicative of the adequacy of the settlement.” Wal-Mart Stores,

Inc. v. Visa U.S.A., Inc., 396 F.3d 96, 118 (2d Cir. 2005). All

of the settlements in this case have been well-received,

counseling in favor of approval.

Notice in this case was sent out in two waves: first in the

FTN, DB, and GS Settlements, and second in the Barclays and

Global Settlements. In the first wave, 25 class members

requested exclusion: 11 from the DB and FTN Settlements only,

one from the GS Settlement only, and 13 from all three

Settlements. Reply in Support of Mot. for Final Approval of

Class Action Settlements with DB, FTN, and GS (“Reply Mem. DB,

FTN, and GS”) at 4, ECF No. 376. These requests constitute only

0.38% of the total eligible volume transacted by the settlement

class. Id. In the second wave, 16 class members requested

exclusion. Reply in Support of Mot. for Final Approval of Class

Action Settlements with Barclays and Global Defts. at 3, ECF No.

407. This accounts for only 0.1% of the total eligible volume

transacted by the settlement class. Id. These de minimis

exclusion requests counsel in favor of approval. See, e.g., In

re Bear Stearns Cos., Inc. Sec., Deriv., & ERISA Litig., 909 F.

Supp. 2d 259, 267 (S.D.N.Y. 2012) (finding that a rate of

exclusion of 5.1% weighed strongly in favor of approval).

Moreover, there was no formal objection to any of the

proposed settlements, which also favors approval. See City of

Pontiac Gen. Employees’ Ret. Sys. v. Lockheed Martin Corp., 954

F. Supp. 2d 276, 279 (S.D.N.Y. 2013). While one class member,

David W. Lippitt, initially objected, he withdrew the objection

after speaking with co-lead counsel. Further, concerns expressed

by five individuals -- Patrick McGraw, Joel Margolis, Eric

Jurist, Donald R. Kunz, and Michael DeBell -- in informal

letters to the Court do not counsel against approval of the

settlements. Most of the letters voiced concerns that the Notice

or Claim form were not user-friendly. However, the Notice

repeatedly invited class members to contact the claims

administrator or Co-Lead Counsel for free help, mitigating this

concern. Moreover, the high volume of participation by class

members -- class members filed claims for 32% of the total

eligible volume transacted by the settlement class -- indicates

that the forms were useable. Reply Mem. DB, FTN, and GS at 4.

Other letters expressed concern about the timing of the mailing

of the Notice Packet. The Court, however, extended the initial

deadline for claim filing to address this concern. See Order,

ECF No. 363. Moreover, as the Court noted in an order dated

January 29, 2020, Co-Lead Counsel provided a satisfactory

response to the concerns raised in all of the letters. Id.

Accordingly, the Court finds that the reaction of the class

favors approval.

d.  Notice

At the preliminary approval stage, the Court found that the

proposed notice plan for all of the settlements was the “best

notice . . . practicable under the circumstances,” Fed. R. Civ.

P. 23(c)(2)(B), and satisfied due process requirements. Since

then, the claims administrator carried out the notice plan as

approved with two minor alterations. First, as indicated above,

in the first wave of notice some class members did not receive

notice packets until after the original January 16, 2020 opt-out

and objection deadline. The Court remedied this issue by

extending the exclusion and objection deadline for these class

members to February 14, 2020 and the extension of the claims

deadline for all class members to February 28, 2020. See Order,

ECF No. 363. Second, Co-Lead Counsel more rigorously filtered

those to whom the notice was sent in the second round of notices

to avoid casting too broad a net, and did not send notices to

nominees of institutions that did not comply with the filtering

(although the nominees had received notice during the first

round). Although Co-Lead Counsel should have informed the Court

of these alterations before making them, the representations

made by plaintiffs’ counsel at the hearing on final approval,

see transcript, 6/9/20, satisfy the Court that these alterations

do not alter the Court’s ultimate conclusion that the notice was

the best practicable under the circumstances and satisfied due

process.

e.  Certification of the Class

At preliminary approval, the Court concluded that

certification of the settlement class for settlement purposes

was proper because it would likely be able to certify the class

at final approval. The Court supported its conclusion with

specific and detailed findings that each of the Rule 23(a)

requirements were met, and made similarly detailed findings that

the requirements for certification of a Rule 23(b)(3) damages

class were met. See Preliminary Approval Orders. That reasoning

continues to support certification for purposes of judgment.

f.  Conclusion

For the foregoing reasons, the Court finds that all five

settlements meet the requirements of Rule 23(e)(2), that the

notice was the best practicable under the circumstances, and

that certification of the class for purposes of judgment is

warranted. The Court thus grants final approval to the five

proposed settlements.

II.   Motion for Attorneys’ Fees and Reimbursement of Litigation

Expenses

a.  Fees

Co-Lead Counsel request attorneys’ fees of 20% of the

$386.5 million total common fund, or $77.3 million. The Court

may determine whether this proposed fee is reasonable via either

a percentage or lodestar method. Goldberger v. Integrated Res.,

Inc., 209 F.3d 43, 47 (2d Cir. 2000). Under the percentage

method, the Court examines the fee as a percentage of the

recovery. Id. Under the lodestar method, the Court “multiplies

hours reasonably expended against a reasonably hourly rate” and

may then in its discretion “increase the lodestar by applying a

multiplier based on” subjective factors. Wal-Mart Stores, 396 F.

3d at 121. A Court employing the percentage method may “cross-

check” to this lodestar method to ensure reasonableness.

Goldberger, 209 F.3d at 50. Regardless of the method the Court

uses, its reasonableness determination is guided by six factors

(the “Goldberger factors”): “(1) the time and labor expended by

counsel; (2) the magnitude and complexities of the litigation;

(3) the risk of the litigation[]; (4) the quality of

representation; (5) the requested fee in relation to the

settlement; and (6) public policy considerations.” Id. (citation

omitted). Because most of these factors weigh in favor of

approval, and the percentage method aided by a cross-check to

the lodestar indicates that the fees are reasonable, the Court

approves the requested fees.

i.   The Time and Labor Expended by Counsel

Goldberger factor one, “the time and labor expended by

counsel” weighs slightly against the reasonableness of the fees.

Co-Lead Counsel spent over 27,500 hours on this case, and

supporting counsel Berman Tabacco and Korein Tillery spent

almost 2,700 hours on it. Mem. of Law in Support of Co-Lead

Counsel’s Amended Motion for an Award of Att’ys Fees and Payment

of Litig. Expenses (“Fee Mem.”) at 2, 4, ECF No. 392. The

combined total of over 30,200 hours included the initial

investigative and pre-filing work, the filing of complaints and

overcoming two motions to dismiss, ongoing litigation that

proceeded in parallel with settlement negotiations, discovery,

and developing the plan of distribution and class certification.

While this number of hours is not particularly high in light of

the dollar amount of the requested fees, see, e.g., Meredith

Corp. v. SESAC, LLC, 87 F. Supp. 3d 650, 669 (S.D.N.Y. 2015)

(awarding attorneys’ fees of $11.8 million, representing 20.2%

of a settlement fund, on a case where lawyers spent

approximately 30,000 hours), the fast pace of this litigation

suggests these hours were efficiently spent. This factor thus

weighs only slightly against approval.

ii.   The Magnitude and Complexities of the Litigation

Goldberger factor two, “the magnitude and complexities of

the litigation,” weighs in favor of the fees’ reasonableness.

Antitrust class actions “are notoriously complex, protracted,

and bitterly fought.” Meredith Corp., 87 F. Supp. 3d at 669

(internal quotations and citation omitted). Such complexity was

present here, given that the plaintiffs claimed that the

defendants colluded in the GSE Bond market over more than seven

years, involving thousands of bond issuances, and implicating

sixteen defendants. In re Citigroup Inc. Bond Litig., 988 F.

Supp. 2d 371, 379 (S.D.N.Y. 2013) (finding that a “class period

[being] relatively lengthy and encompass[ing] a significant

number of securities issuances” indicated complexity). This

factor thus weighs in favor of the fees’ reasonableness.

iii.   The Risk of the Litigation

Goldberger factor three, “the risk of the litigation,”

weighs in favor of the fees’ reasonableness. Courts have held

that this factor is often “the most important Goldberger

factor.” In re Payment Card Interchange Fee & Merch. Disc.

Antitrust Litig., 991 F. Supp. 2d 437, 440 (E.D.N.Y. 2014); see

also Goldberger, 209 F.3d at 54 (“We have historically labeled

the risk of success as ‘perhaps the foremost’ factor to be

considered in determining whether to award an enhancement.”

(citation omitted)). As the Court noted in its preliminary

approval orders, this case involved substantial risk for

plaintiffs. See, e.g., FTN and DB Order at 6-9. At all times

during the litigation, plaintiffs faced uncertainty in their

ability to establish liability, obtain class certification, and

prove damages. This is particularly true in light of the fact

that defendants have vast combined resources and are represented

by top counsel from many of the nation’s most prominent law

firms. Moreover, co-lead counsel assumed most of this risk

because they were working on a contingent-fee basis. See City of

Providence v. Aeropostale, Inc., No. 11-cv-7132, 2014 WL

1883494, at *14 (S.D.N.Y. May 9, 2014). This factor thus weighs

in favor of the fees’ reasonableness.

iv.   The Quality of Representation

Goldberger factor four, “the quality of representation,”

also weighs in favor of approval. One means of assessing the

quality of the representation is looking to “the recovery

obtained.” In re Merrill Lynch Tyco Research Sec. Litig., 249

F.R.D. 124, 141 (S.D.N.Y. 2008). Here the settlement fund of

$386.5 million is quite large, and is also accompanied by

compliance measures protecting the interests of the class.

Moreover, a lack of objections from the class members,

particularly from sophisticated institutional investors, to the

proposed fees indicates that the quality of representation was

high. Tiro v. Pub. House Investments, LLC, No. 11 CIV. 7679 CM,

2013 WL 4830949, at *14 (S.D.N.Y. Sept. 10, 2013) (crediting the

lack of objections to the attorneys’ fee award as a factor

demonstrating the quality of representation). Finally, the Court

itself had occasion to notice the high quality of plaintiffs’

counsels’ work, both in briefs and oral argument. Moreover,

counsels’ achievement in “obtaining valuable recompense and

forward-looking protections for its clients is particularly

noteworthy given the caliber and vigor of its adversaries.”

Meredith Corp., 87 F. Supp. 3d at 670. This factor thus weighs

in favor of the fees’ reasonableness.

v.   The Requested Fee in Relation to the Settlement

Goldberger factor five, “the requested fee in relation to

the settlement,” weighs slightly in favor of approval based on

the percentage method with a cross-check to the lodestar. The

Court begins with an application of the percentage method. In

megafund settlements of more than $100 million, fee awards will

frequently “follow a sliding-scale” as the settlement size

increases, and consequently, fee percentages generally “bear an

inverse relationship to the amount of the settlement.” Dial

Corp. v. News Corp., 317 F.R.D. 426, 435 (S.D.N.Y. 2016). This

avoids windfalls for attorneys in large settlements. Id.

A number of sources indicate that Co-Lead Counsel’s fee

request falls properly within that sliding scale. First, Co-Lead

Counsel provides its own research of similarly sized megafund

antitrust settlements in this District and elsewhere. See ECF

No. 389-2. This research shows that in cases where the award was

between $100 million and $500 million, the average attorneys’

fees were 26.89%, and in cases awarding between $300 million and

$500 million, the average fees were 23.26%. Id. Further, an

independent study from 2017 shows that between 2009 and 2013,

the mean settlement recovery in antitrust settlements nationwide

was $501 million, and the mean fee award was 27%.2 Finally, a

2010 study of class action settlements found that the average

fee award for settlements between $250 million and $500 million

was 17.8%, with a median award of 19.5% and a standard deviation

of 7.9%.3 These studies indicate that the 20% fee is reasonable

for the size of the settlement based on the percentage method.

While a cross-check to the lodestar method indicates that

the fees are slightly high, the fees nonetheless fall within the

range of reasonableness. Co-Lead Counsel have spent more than

30,200 hours on the case -- 30,281.14 hours to be precise --

with billing rates ranging from $350 to $1,150 per hour. Based

on these numbers, Co-Lead Counsel calculates the lodestar amount

to be $18,880,537.75. A fee award of 20% of the settlement fund,

or $77.3 million, thus represents a multiplier of 4.09 of this

lodestar. Although on the high end, a 4.09 multiplier is within

2 See Theodore Eisenberg, Geoffrey Miller & Roy Germano,

Attorneys’ Fees in Class Actions: 2009-2013, 92 N.Y.U. LAW J.

937, 952 tbl. 4 (2017).

3 Brian T. Fitzpatrick, An Empirical Study of Class Action

Settlements and Their Fee Awards, 7 J. EMPIRICAL LEGAL STUD.

811, 839, tbl. 11 (2010)

the range of what has considered reasonable by courts. See Wal-

Mart Stores, 396 F.3d at 123 (upholding a cross-check multiplier

of 3.5 and citing an SDNY case that held that “multipliers of

between 3 and 4.5 have become common” (quoting In re NASDAQ

Mkt.-Makers Antitrust Litig., 187 F.R.D. 465, 489 (S.D.N.Y.

1998)). Furthermore, the requested attorneys’ fees are lower

than those agreed to in the fee schedule with plaintiffs.

Accordingly, the Court finds that “the requested fee in relation

to the settlement” weighs, if only slightly, in favor of

approval.

vi.   Public Policy Considerations

Goldberger factor six, “public policy considerations,”

favors the reasonableness of the fees. Generally, public policy

is served by ensuring a fee is large enough to incentivize

lawyers to bring meritorious class actions in the future. See In

re Colgate-Palmolive Co. ERISA Litig., 36 F. Supp. 3d 344, 352

(S.D.N.Y. 2014). More specific to this case, ever since the

enactment of the Sherman Act in 1890, Congress has encouraged

enforcement of the antitrust laws through private civil suits to

deter infringing conduct in the future. See Pillsbury Co. v.

Conboy, 459 U.S. 248, 262-63 (1983) (“This Court has emphasized

the importance of the private action as a means of furthering

the policy goals of certain federal regulatory statutes,

including the federal antitrust laws.”). Public policy

considerations thus favor the reasonableness of the fees in this

antitrust case.

vii.   Fees Conclusion

As explained above, five of the six Goldberger factors in

this case weigh in favor of the proposed fees’ reasonableness,

and one weighs only slightly against it. Accordingly, the Court

finds the proposed attorneys’ fees of 20%, or $77.3 million, is

reasonable and merits approval.

b.  Litigation Expenses

In addition to fees, Co-Lead Counsel seek reimbursement of

their litigation expenses in the amount of $1,718,773.04, plus

interest on the fee and expense award at the same rate that is

earned by the settlement fund. “Counsel who obtain a common

settlement fund for a class are entitled to reimbursement of

[reasonable] expenses that they advance to a class.” Meredith

Corp., 87 F. Supp. 3d at 671. The majority of Co-Lead Counsel’s

expenses were devoted to expert work, which was essential to the

resolution of this complex case. Moreover, Co-Lead Counsel kept

discovery costs low by using its in-house technology to manage

document production. The remaining expenses for travel and meal

costs, copying costs, and online research, filing and service

fees, and telephone charges were reasonable. The Court thus

awards Co-Lead Counsel the requested reimbursement of expenses.

III.   Motion for Service Awards

Plaintiffs Birmingham, I.B.E.W., and Pennsylvania Treasury,

have moved for awards totaling $400,000 for their service as

class representatives in this Action. Pennsylvania Treasury

seeks an award of $300,000 and Birmingham and I.B.E.W. each seek

$50,000. The district court, in its discretion, may grant class

representatives an incentive or “service” award in addition to

their allocable share of the ultimate recovery. Dial Corp. v.

News Corp., 317 F.R.D. 426, 439 (S.D.N.Y. 2016). In deciding

whether to grant awards to class representatives, the Court

looks to “the existence of special circumstances” such as “risk

. . . incurred by the plaintiff-applicant in becoming and

continuing as a litigant, the time and effort expended by that

plaintiff . . ., any other burdens sustained by that plaintiff .

. . and, of course, the ultimate recovery.” Id. (quoting Roberts

v. Texaco, 979 F. Supp. 185, 200 (S.D.N.Y. 1997)).

Here, a number of factors suggest that an award is in

order. First, as active participants in the GSE Bond market, the

named plaintiffs took a risk in deciding to serve as class

representatives and sue defendants. GSE Bonds are among

plaintiffs’ core investment vehicles, and defendants were (and

some still are) the largest dealers of GSE Bonds in the

secondary market. Plaintiffs had no guarantee that defendants

would choose to continue to do business with them if they became

involved in the suit. Second, the named plaintiffs spent many

hours reviewing and commenting on pleadings and motions,

identifying and collecting materials for discovery, discussing

litigation strategy and participating in settlement

negotiations. This added significant value to the prosecution of

the case. Third, the requested award is only a small fraction --

approximately 0.103% -- of the large settlement fund in this

case. See, e.g., Dial Corp., 317 F.R.D. at 438-39 (awarding

0.12% of a settlement fund to six class representatives).

Furthermore, while the Court was initially concerned that

the $300,000 award to Pennsylvania Treasury was too large, the

Court is now satisfied that the award is merited. Much of the

$300,000 award requested by Pennsylvania Treasury is designed to

cover $178,000 in fees it payed to the firm Hangley Aronchick

Segal Pudlin & Schiller (“Hangley”), which provided independent

advice to Pennsylvania Treasury in its role as class

representative. The Court has examined Hangley’s timesheets and

determined that the work was not duplicative of Co-Lead

Counsel’s work, that the fees are reasonable, and that

reimbursement is thus warranted. Moreover, the Court finds that

Pennsylvania Treasury did an excellent job in its role as class

representative such that it merits a substantial award beyond

its out-of-pocket costs. As the Court had urged it to be,

Pennsylvania Treasury was involved at every step of the

litigation, ensuring that the litigation was client-driven and

protected the interests of the class. Furthermore, over the next

two years, Pennsylvania Treasury will continue to be involved in

supervising compliance measures that it helped to develop to

ensure the continued integrity of the GSE bonds markets. The

Court thus finds that the plaintiffs’ requested service awards

are warranted.

IV.   Conclusion

At the preliminary approval stage the Court found that it

was likely to approve the proposed settlements under Rule

23(e)(2) and certify the class for purposes of judgment.

Circumstances since preliminary approval have only confirmed

that final approval and certification are warranted.

Furthermore, Co-Lead Counsel’s requested attorneys’ fees and

expenses are reasonable under the Goldberger factors, and based

on both the percentage method and a cross-check to the lodestar.

Finally, class representatives’ excellent performance in

monitoring and contributing to the successful conclusion of this

litigation warrants substantial service awards. Accordingly, the

Court finds that the motions for final approval, attorneys’ fees

and expenses, and service awards should be granted. The Court

will shortly docket a number of judgments and orders in this

matter effectuating this conclusion.

SO ORDERED.

Dated: New York, NY ________________________

June 16, 2020 JED S. RAKOFF, U.S.D.J.