In Re Senergy and Thoro Class Action Settlement

IN RE SENERGY AND THORO CLASS ACTION SETTLEMENT, 1999 NCBC 7

STATE OF NORTH CAROLINA ) IN THE GENERAL COURT OF JUSTICE

COUNTY OF NEW HANOVER ) SUPERIOR COURT DIVISION

CIVIL ACTION NO. 96-CVS-5900

IN RE SENERGY AND THORO ) ORDER ON PETITION

CLASS ACTION SETTLEMENT ) FOR ATTORNEY FEES

{1} This matter is before the Court on the petition for attorney fees and expenses filed by class counsel in

connection with the partial settlement of this class action involving Defendant Senergy, Inc. and Thoro

Systems Products, Inc. (hereinafter the "Settling Defendants"). The Court has previously approved the

settlement of the class claims against the Settling Defendants. Claims against the remaining defendants are

set for trial. For the reasons set forth below, the Court has provided an initial fee and supplemental fee

plan to compensate class counsel for their efforts.

I.

A.

{2} This action was commenced on January 5, 1996 against nine defendants, including Senergy, Inc., who

among them provided the vast majority of synthetic stucco or Exterior Insulation and Finish Systems

("EIFS") to the marketplace in North Carolina and nationally. Settling Defendants account for

approximately ten percent (10%) of the national market.

{3} The action was certified as a class action by Judge Ernest B. Fullwood on January 9, 1996 and

subsequently recertified by Judge Fullwood on September 18, 1996. Thereafter the case was assigned to

this Court under Rule 2.1 of the General Rules of Practice for the Superior and District Courts. After the

settlement with the Settling Defendants and an appeal of another of this Court’s orders, this Court

bifurcated the remaining claims of liability and damages and ordered separate trials for each of the

remaining defendants on the issues of defective product design and failure to warn. That order has been

appealed.

{4} This class action constitutes but one facet of a multidimensional national litigation problem.

Thousands of individual actions have been filed across this state and the nation by individual homeowners

against the defendants in this action and the builders and others associated with the construction of their

homes using synthetic stucco. Over six hundred potential class members have opted out of the class in this

action. Other class actions have been filed and may be filed in the future in the federal courts and other

state courts. Class counsel in this action have represented and may, in the future, represent parties in other

similar litigation. See, e.g., In re Stucco Litigation, 175 F.R.D. 210 (E.D.N.C. 1997). In addition, the

industry wide nature of the original action brought by plaintiffs’ counsel puts the potential recovery in this

lawsuit into the megafund category. Earlier attempts at a nationwide, industry wide settlement in this case

failed.

{5} Afloat in this sea of litigation, Settling Defendants and class counsel crafted a settlement agreement

that covered only homes constructed using the Settling Defendants’ products. This Court ultimately

approved that agreement, which was subsequently modified several times with court approval. The

original agreement as modified and approved by the court is hereinafter referred to as the "Settlement

Agreement." Specific terms of the Settlement Agreement are pertinent to the matter currently before the

Court.

{6} The settlement included a recovery program for homeowners. That recovery program provided for an

initial inspection of their homes. If they qualified for remediation of problems associated with the use of

Settling Defendants’ products, they could have repairs made to their property. The settlement included

limited homeowners warranties. Under some circumstances, class members could receive a cash-out

option of four dollars per square foot of EIFS installed on their property. At this stage of the settlement

history, the cash-out option has been used almost exclusively. Former owners of a property on which the

Settling Defendants’ EIFS had been installed were entitled to a payment of actual damages up to one

thousand dollars ($1,000.00). A claims administrator was appointed to administer the recovery program.

The administrator’s fees are paid out of the funds set aside to pay for the program.

{7} Under the terms of the settlement, the Settling Defendants waive certain defenses. In addition, the

settlement contained provisions that were beneficial to class members with respect to the tolling of the

statutes of limitations and repose. Some barred claims may have been revived.

{8} Significantly, the benefits of the settlement were assured by the acquisition of an insurance policy that

insures payment of the first twenty million dollars ($20,000,000.00) in benefits, costs of administration,

and attorney fees. If the $20,000,000.00 is exceeded, assurance of payment disappears, but Settling

Defendants may continue to financially support the settlement program. If Settling Defendants decide not

to continue their support of the program, plaintiffs in this action may pursue this action on behalf of

remaining class members, or the uncompensated class members themselves can litigate individually, with

the statutes of limitation and repose having been tolled. Thus, the costs and benefits of the program are

fully funded up to $20,000,000.00, but could go higher. Class members who remain uncompensated after

the initial fund is exhausted will still have a remedy, but will have to look somewhere other than the fund

for compensation for their damages.

{9} In real terms, the Settlement Agreement provides homeowners with about 30 to 40 cents on the dollar

to cover their damages. It does not fully compensate them. However, it does provide immediate funds for

repair to their homes. In addition, since the first twenty million dollars of the settlement is assured, the

prospect of no recovery in the event of financial failure of the Settling Defendants is eliminated. The

settlement also left the homeowners free to pursue claims against contractors and others for the balance of

their losses. In this respect the settlement mirrored what was happening in the settlement of the individual

lawsuits, where damages are being apportioned among the contractor, subcontractors, EIFS manufacturers

and others. The settlement was a hard fought compromise that the Court believed was in the best interests

of the class members. It was a good, workman-like settlement. It was not exceptional. An exceptional

settlement would have fully compensated class members for their damages.

B.

{10} The Settlement Agreement provided that class counsel could request up to thirty percent of the

twenty million dollars of insured payments for fees and expenses. The Notice of Settlement informed class

members that class counsel would ask for an award of fees and expenses of up to thirty percent of the

insured portion of the recovery program. No class member appeared at the Final Settlement Hearing to

object to the fee request. Class counsel have filed a fee request seeking six million dollars

($6,000,000.00), or thirty percent, as an award of attorney fees and expenses in this case. The amount

awarded by the court will be deducted from the pool of insured funds for claimants under the recovery

program. If class counsel were awarded the full fee, the amount remaining to fund the recovery program

for class members would be reduced to fourteen million dollars.

{11} In an unusual development in class action settlements, Settling Defendants have objected to the fee

request. Normally a class action settlement results in creation of a closed end fund to which defendants

contribute, and their involvement ends there. The court controls the disbursement of the funds, including

allocation of the fund among class members and their counsel. In this case, the recovery program may not

be closed at the amount insured, and, conceivably, Settling Defendants could elect to pay out more under

the recovery program if and when the first twenty million dollars is exhausted. Therefore, Settling

Defendants have a vested interest in the amount of attorney fees awarded by the Court. The more money

left in the insured pool, the less likely it will be that the insured pool is exhausted and that they will be

called upon to decide whether to contribute more to the recovery program. For that reason, Settling

Defendants have taken an adversarial position on the award of fees and expenses in this case.

{12} In making their fee request, class counsel have placed all of their eggs in one basket. They ask the

Court to award them thirty percent of the insured pool without regard to whether it is fully consumed,

without regard to the specific time and expense directly attributable to the case against the Settling

Defendants, and without regard to the actual benefits to the settlement class. Class counsel have taken an

industry wide, national approach to this litigation for purposes of justifying their fee application. This is

reflected in their lodestar figures, which are intended to show work done on all aspects of the stucco

litigation in and out of North Carolina. Class counsel have taken this same approach to the case as a

whole. Class counsel’s insistence on this industry wide approach to all aspects of this litigation has proved

troublesome in many aspects of this case, and now raises problems for the Court in its determination of the

fee issues. The reasons the industry wide approach poses problems will be discussed more fully herein.

C.

{13} The total amount ultimately paid by Settling Defendants will depend on a number of factors that

cannot be fully known at present, including the number, timing and nature of the claims to be made, the

costs of administration, and the potential need for further notice to the class. The large number of opt-outs

may significantly reduce the claims under the recovery program and still generate liability for the Settling

Defendants in other cases. The recovery program is a work in progress, and the true benefit to the class

will only become apparent over time. The Court has waited to rule on the attorney fee award in order to

assess the effectiveness of the recovery program. At this point, the program has undergone enough

adjustments and has been in operation sufficiently long to allow for a limited assessment of how the

recovery program will benefit class members.

{14} Settling Defendants are required to file a monthly report with the Court detailing the effectiveness

and operation of the recovery program. Not unexpectedly, there have been problems and adjustments

made in the recovery program. Class counsel have remained actively involved with the administration of

the program and have persistently protected the interests of the class members.

{15} The last report submitted to the Court indicates that of the total of 995 claims filed with the Claims

Administrator, 586 have been identified as Settling Defendants’ products, 144 are unidentified and 265

have been identified as other manufacturers’ products. All fully processed claims have been cashed out

with a total payment of $1,190,171.20 and inspection costs of $5,151.10. Since all settlements have been

by cash-out, no repairs have been made and no warranties have been issued. Homeowners appear to want

their money to repair their homes in the manner best suited to their needs and desires. Settling Defendants

have obviously found this the most economic route to follow. It eliminates the cost of repair and warranty

and puts a total end to the claim. It also reduces administration costs, leaving more money to pay claims. It

is fair to say that the total benefit to class members of the recovery program, including cost of

administration and excluding notice cost, is approximately one million, five hundred thousand dollars

($1,500,000.00) through the end of June 1999.

{16} The program has many more years to run and further notice may be required to reach class members.

As stated above, there are many factors affecting the future payout of the settlement that are not yet

known. It is possible that many homeowners with larger claims opted out. If so, they are not class

members for whom a benefit has been obtained by class counsel. It is also possible that the problems are

not as widespread as anticipated, or that the notice program which counsel jointly agreed upon and the

court approved was inadequate. It could be that the settlement was not designed in such a way that it

attracted class members to apply for benefits. Other settlements or litigation may heighten public

awareness of the problem and the recovery program, leading to an increase in claims. Still, the initial

results do not indicate that the recovery program will exhaust the insured pool. It may not even come

close. Thus far, the actual benefits to the class members do not coincide with the total available benefits,

and the reasons for that disparity are not apparent.

II.

A.

{17} The initial question that the Court must decide is whether or not a common fund has been created

which would support an award of attorney fees from the fund. The common fund exception to the common

law rule that attorney fees should not be awarded to the prevailing party in litigation was firmly

established in Horner ex rel. City of Burlington v. Chamber of Commerce of the City of Burlington, Inc.,

236 N.C. 96, 72 S.E.2d 21 (1952). The Court is guided in its determination of the existence of a common

fund by Bailey v. State of N.C., 348 N.C. 130, 500 S.E.2d 54 (1998). In that case, the Supreme Court said:

The criteria [for appropriate fee-shifting cases] are satisfied when: each member of a certified

class has an undisputed and mathematically ascertainable claim to part of a lump sum

judgment recovered on his behalf.

....

In the present case, the named Plaintiffs have recovered a determinate fund for the benefit of

every member of the class whom they represent. The Defendants’ liability has been proven.

The qualifications for class membership have been established and the formula for computing

individual refunds has been set. Thus, the judgment fund itself is a quantifiable sum that has

been created by the litigation undertaken by the representative Plaintiffs. All the remaining

class beneficiaries need to do in order to recover their proper refund or credit is to prove their

individual claims against the judgment fund. As such, we are persuaded that the recovery at

issue in this case properly constitutes a common fund for purposes of shifting attorneys’ fees

under the common-fund doctrine of Horner and its progeny.

Id. at 161-62, 500 S.E.2d at 72-73. The Settlement Agreement in this case provided a minimum sum that

would be available to fund the recovery program and make payments to class members. The fact that the

initial twenty million dollar amount may be increased does not make it an indeterminate amount. At least

the minimum amount is fixed, and that is the equivalent of a lump sum judgment and a quantifiable sum.

Likewise, the fact that the fund is to be distributed based on individual claims rather than a mathematical

formula does not preclude the existence of a common fund. The criteria for recovery are clearly

delineated. In fact, the experience with the settlement indicates that the funds are being distributed on a

formula basis since every claim has been handled on cash-out basis. The fact that class members who file

late run the risk that the insured pool might be exhausted does not automatically dictate a finding that this

is not a common fund. See, e.g., the decision of the Delaware Supreme Court in Goodrich v. E.F. Hutton

Group, Inc., 681 A.2d 1039 (1996) (holding that a common fund existed even though class members’

individual claims might be reduced based on the number of claimants). Based on the foregoing case law,

the Court is persuaded that the settlement creates a common fund for purposes of shifting attorneys’ fees.

B.

{18} Having found that there is a common fund from which reasonable attorney fees may be awarded, the

Court next turns to a discussion of the method of determining a reasonable fee under North Carolina law.

This Court has a duty to look carefully at the fees sought by class counsel in common fund cases. This is

an equitable proceeding, and once the common fund is recognized and a fee request made, class counsel

cease to be fiduciaries to the class and become claimants against the fund. Horner, 236 N.C. at 97-98, 100,

72 S.E.2d at 22-24; Goodrich, 681 A.2d 1039. Often, the court is left as the only advocate for the class

members. Even though Settling Defendants have taken a position in opposition to the fee request, they

have done so for their own benefit, not that of the class. The Court has considered appointing an amicus

curiae for the purpose of briefing and presenting argument on behalf of the class members, but has elected

not to do so in this case at this time. See Goodrich, 681 A.2d at 1042. In the future, the Court may also

consider appointment of a special master to make recommendations on fee requests in instances where the

time involved in reviewing the fee request and supporting documentation may be excessive.

{19} The determination of reasonable attorney fees in common fund cases is generally left to the sound

discretion of the trial court. Horner, 236 N.C. at 97-98, 72 S.E.2d at 22-24. See also Federal Judicial

Center, Manual For Complex Litigation, Third, sec. 24.121, at 190-91 (1995). In exercising its discretion,

this court has attempted to apply established equitable precepts and will articulate its reasons for reaching

the particular fee determination in this case.

{20} The Court starts its analysis of methodology to be employed with the proposition that class actions in

general, and the determination of attorney fees in common fund cases in particular, involve issues of

equity and require the application of equitable principles. The Court also begins this analysis with the

proposition that it must exercise its discretion in common fund cases with "jealous caution, lest the

administration of justice be brought into disrepute." Horner, 236 N.C. at 101, 72 S.E.2d at 24. In reaching

its fee decision, the court must protect the public interests, the interests of absent class members and the

interests of class counsel.

{21} There are no appellate decisions in North Carolina providing guidance on the appropriate

methodology to be used by trial courts in considering class action fee requests. Therefore, this Court has

looked for guidance to the methodologies employed in other states and the federal courts as well as those

employed by other trial courts in this state.

{22} Federal courts have applied various methodologies to the determination of fee requests, and there is

no settled approach. Thus, the federal decisions offer much information, but little certainty with respect to

choice of methodology. Two good sources chronicling the history of various methodologies employed by

the federal courts are Swedish Hospital Corp. v. Shalala, 1 F.3d 1261 (D.C.Cir. 1993), and In re: Nasdaq

Market-Makers Antitrust Litigation, 1998 WL 782020 (S.D.N.Y.), M.D.L. No. 1023, 94 Civ. 3996

(RWS), 1998 U.S. Dist. LEXIS 17557 (S.D.N.Y.). See also Report of the Third Circuit Task Force, Court

Awarded Attorney Fees, 108 F.R.D. 237 (1985). This court has concluded that the majority of federal

circuit courts now leave it to the trial court’s discretion to choose between the lodestar and percentage

methods or some hybrid thereof in determining fees in common fund cases. Each method will be described

below.

{23} Class counsel’s fee request is based upon a percentage of the fund method. Under this method class

counsel are simply awarded a percentage of the fund created for the class. In this case class counsel seek

thirty percent (30%) of the insured amount of the settlement. The percentage of the fund method has

advantages and disadvantages. On the positive side: "[I]t is easy to calculate; it establishes reasonable

expectations on the part of the plaintiffs’ attorneys as to their expected recovery; and it encourages early

settlement, which avoids protracted litigation." Rawlings v. Prudential-Bache Properties, Inc., 9 F.3d 513

(6th Cir. 1993).

{24} The percentage of the fund method should reward the efficient achievement of results for the class,

rather than encourage the run up of needless hours of attorney time before settlement. Adoption of a per se

rule employing the percentage of the fund method would encourage more lawyers to undertake

contingency fee class action cases, thus affording more representation to people who might not otherwise

obtain it.

{25} A significant disadvantage to the percentage of the fund method is the potential for abuse. The

potential for abuse here is the possibility that class counsel will be paid a percentage of a large award that

bears no rational relation to either the amount of time spent on the case or the actual benefit to the class

members. The attempt to create a large percentage fee in such circumstances is an abuse common to class

action litigation, and one that can lead to detrimental public perceptions of both the bar and the

administration of justice. It is that abuse which the North Carolina Supreme Court warned against in

Horner, and which was of concern to the Court of Appeals for the First Circuit in In re Thirteen Appeals

Arising Out of San Juan, 56 F.3d 295, 307-08 (1st Cir. 1995) (stating that the percentage of fund method

may result in the overcompensation of lawyers in situations where actions are resolved before counsel has

invested significant time or resources). The percentage of the fund method may also encourage lawyers to

settle too low and too quickly in order to maximize their hourly rate. See Rawlings, 9 F.3d at 516.

{26} Use of the percentage of the fund method may also pose problems where the determination of the

"fund" itself, from which fees should be calculated, is uncertain. See Goodrich, 681 A.2d at 1049. The

determination of the "fund" is a real problem in this case, as will be discussed in more detail.

{27} At least one judge has expressed concern that use of the percentage of the fund method can

encourage frivolous lawsuits. See dissenting opinion of Judge Ginsburg in Swedish Hospital Corp., 1 F.3d

at 1273 (reliance upon the percentage-of-the-fund approach without any regard for the lodestar may

produce excessively high awards and thus encourage even relatively non-meritorious cases to be brought).

{28} Another concern which the courts should have about per se adoption of a percentage of the fund

method is the potential it has for dictating litigation strategy. We have reached the stage where courts are

called upon to distinguish between an ordinary common fund and a "megafund," and whether different

percentages should be applied depending on whether the recovery constitutes a megafund. See, e.g., In re:

Nasdaq Market-Makers Antitrust Litigation, No. 94 Civ. 3996(RWS), 1998 WL 782020 (S.D.N.Y. Nov.

9, 1998) (where the fee awarded was one hundred and forty-three million dollars ($143,000,000.00)).

Most courts now agree that the percentage of the fund should go down as the amount of the fund goes up.

Goodrich, 681 A.2d at 1048-49. See also Report of the Third Circuit Task Force, Court Awarded Attorney

Fees, 108 F.R.D. at 2563; Herbert B. Newberg & Alba Conte, Newberg on Class Actions § 14:03, at 14-

13 to 14-14 (3d ed. 1992).

{29} Megafunds can result in megafees, encouraging counsel to build bigger lawsuits, particularly

nationwide class actions, in an effort to maximize the potential fees generated by a larger fund in one

lawsuit. The United States Supreme Court, based on concerns including, but not limited to, disparate

treatment of subclasses, lack of predominance of class issues, and conflicts of interest in the representation

of the class, has recently discouraged such enormous consolidation of product liability claims in two

decisions: Amchem Products, Inc. v. Windsor, 521 U.S. 591, 138 L. Ed. 2d 689 (1997) and Ortiz v.

Fibreboard Corp., 67 U.S.L.W. 4632 (U.S. June 23, 1999), No. 97-1704, 1999 U.S. LEXIS 4373, 1999

WL 412604. State courts should be equally cautious.

{30} The other most widely used method of determining fees is the lodestar method. It awards fees based

upon a reasonable hourly rate for the time reasonably expended to create the fund. In the past courts have

added a multiplier or fee enhancer to encourage counsel to take difficult contingent fee cases. It is the

lodestar method which is espoused by Settling Defendants in this case.

{31} The popularity of the lodestar method has varied over the last twenty years. At this point in time is

most widely used in statutory fee shifting cases rather than common fund cases. Its main advantage, and

the reason it is used in fee shifting cases, is that it sets a fee more directly related to the actual time spent

on the case by counsel. Thus, it protects against abuse and the creation of a negative image for the bar and

the legal system created when lawyers are grossly overcompensated. Lindy Bros. Builders, Inc. of

Philadelphia v. American Radiator & Standard Sanitary Corp. 487 F.2d 161 (3rd Cir. 1973). Thus, courts

may use the lodestar method in common fund cases where the percentage of the fund method would result

in a fee that is either too small or too large in light of the attorney hours devoted to the case. See Six

Mexican Workers v. Arizona Citrus Growers, 904 F.2d 1301 (9th Cir. 1990). The lodestar method is also

useful in cases in which the nature of the settlement evades the precise evaluation needed for the

percentage of the fund method. In re Gen. Motors Corp. Pick-Up Truck Fuel Tank Prod[s]. Liab. Litig.,

55 F.3d 768, cert. denied, 516 U.S. 824, 133 L.Ed. 45, 116 S.Ct. 88 (3rd Cir. 1995). It also can be used as a

check on the appropriateness of fee set by a percentage of the fund. See Goodrich, 681 A.2d at 1047. The

amount of work actually done by the lawyer is a fact which should never be totally ignored in deciding the

fair allocation of the common fund between counsel and the beneficiaries they represent.

{32} The lodestar method has its disadvantages as well. It poses a problem for overburdened trial courts

because the process of determining the lodestar can be difficult and time consuming. It may not

adequately encourage lawyers to undertake difficult cases. It also may burden lawyers by requiring a more

meticulous accounting of hours. In addition, the lodestar method has the potential to encourage lawyers to

expend needless hours before settling. Questions will inevitably arise concerning whether the time spent

was reasonable and necessary. Questions will also arise as to the proper rates to be charged. For instance,

should out of state attorneys charge rates appropriate for North Carolina rather than their home state when

representing North Carolina residents in class actions? In short, the lodestar method promotes inefficiency

and creates issues not raised by the percentage of the fund method. See Report of the Third Circuit Task

Force, Court Awarded Attorney Fees, 108 F.R.D. at 255. The pendulum shifts from common fund to

lodestar and back again have naturally lead some courts to leave the pendulum hanging in the balance.

{33} A common modern approach to fee awards is described in In re Thirteen Appeals Arising Out of San

Juan:

Given the peculiarities of common fund cases and the fact that each method, in its own way,

offers particular advantages, we believe the approach of choice is to accord the District Court

discretion to use whichever method, POF or lodestar, best fits the individual case. We so hold,

recognizing that the discretion we have described may, at times, involve using a combination

of both methods when appropriate.

In re Thirteen Appeals Arising Out of San Juan, 56 F.3d at 308.

{34} Trial courts in North Carolina have adopted this last approach and have considered a "hybrid" of both

methods. Judge Manning adopted such an approach in a detailed and well reasoned opinion in the much

publicized case from Wake County, Smith v. State of N.C., 95 CVS 6715 (Wake Co. Sup. Ct (Nov. 20,

1997)). This Court adopted such an approach in another Wake County case, Byers v. Carpenter, No. 94

CVS 04489 (Wake Co. Sup. Ct. (Jan 30, 1998)) (Tennille, J.). The Attorney General of North Carolina

has consistently urged this court to take a hybrid approach when considering fee applications in cases

involving consumers in North Carolina. Part of the hybrid approach is the consideration of factors other

than percentage of the fund and hours worked. Judge Manning and this Court have specifically relied upon

Rule 1.5 of the Revised Rules (July 24, 1997) of Professional Conduct of the North Carolina State Bar

(formerly Rule 2.6(b)) in reviewing the reasonableness of fees. The Court will address below each of those

factors as they relate to this case.

{35} The hybrid approach is supported by the fundamental consideration that the decision to reduce a

common fund by paying attorney fees to class counsel is equitable in nature. The principle that this Court

believes the North Carolina appellate courts would apply is best stated by the Delaware Supreme Court in

Goodrich:

This case establishes, once again, that the Court of Chancery’s existing multiple factor

approach to determining attorney’s fee awards remains adequate for purposes of applying the

equitable common fund doctrine. The adoption of a mandatory methodology or particular

mathematical model for determining attorney’s fees in common fund cases would be the

antithesis of the equitable principles from which the concept of such awards originated. New

mechanical guidelines are neither appropriate nor needed for the Court of Chancery.

681 A.2d at 1050 (citations omitted).

{36} This Court concludes that a multiple factor or hybrid test is the best method of determining attorney

fees in common fund cases and the method which the North Carolina appellate courts would adopt.

C.

{37} The Goodrich case is instructive on one other important fee award issue. This Court must determine

whether the attorney fee award must be based on the entire fund available or whether the Court can also

take into consideration the benefits actually realized by the class members. Class counsel urge the Court

to follow the decision in Boeing Co. v. Van Gemert, 444 U.S. 472, 62 L.Ed.2d 676, 100 S.Ct. 745 (1980),

in which the Supreme Court upheld the trial judge’s decision to base the fee award on the entire fund

available rather than on the actual benefits derived by the class. Settling Defendants request that the Court

base its decision solely on the benefits paid from the fund as was done by the Court of Chancery in

Goodrich. The Court concludes that the decision of the Delaware Supreme Court permitting the trial court

to consider the actual benefits received by class members is the correct approach and the one that would

be adopted by the North Carolina appellate courts, at least under the circumstances of this case.

{38} Goodrich involved a claim for attorney fees against a settlement fund of $3.3 million. The fund was

set up to reimburse class members for losses allegedly due to E.F. Hutton’s delay in paying customers by

paying them from banks more than 500 miles from the Hutton office at which the customer transacted

business. The proof of claim requirements for class members posed a challenge to even the most

sophisticated investor and record keeper. It was clear that many individual investors would not have

adequate records to make a claim against the fund and, therefore, the fund would not be fully exhausted.

There were two other significant facts about the Goodrich settlement relevant to this case. First, if the

entire fund were not claimed, any remaining funds in escrow would be returned to Hutton. Second, if the

claims exceeded the amount of the fund, each claim would be reduced on a pro rata basis. The Court of

Chancery awarded a fee based upon the total amount actually paid out to class members, not the full

amount of the fund, holding:

Where because of the nature of the claim and the settlement there is good ground to suppose

that there may well be a substantial non-claim problem, the most sensible way to compensate

class lawyers, consistent with the underlying rationale for such awards, is on a contingency

basis: that is to do as I did in this instance, to award a fair fee and make its payment coincide

with the distributions to class members.

681 A.2d at 1043.

{39} The Delaware Supreme Court upheld the Chancellor’s exercise of his discretion and rejected class

counsel’s argument (similar to that made in this case) that the court should adopt a per se rule that

percentage awards should be based on the total fund available, not the actual benefits received by the

class. The court first pointed out that in Boeing the Supreme Court neither adopted nor recommended a per

se rule, but simply affirmed the trial courts exercise of its discretion under the appropriate standard of

review. It then distinguished the Boeing decision relied upon by class counsel in this case on two grounds.

{40} First, it found that the class members in Boeing had a claim in a fixed amount and that Boeing’s right

to the fund remainder was latent. In contrast, Hutton had a vested interest in the remainder of the common

fund. In this case Settling Defendants have more of a vested interest than a latent interest in the remainder

of the fund. Second, in Boeing the class members had an undisputed and mathematically ascertainable

claim to part of a lump sum judgment. In Hutton, class members had to submit claims and if the claims

exceeded the fund, the amount to which they were entitled could be reduced. Class members in the

Senergy settlement are in a similar position to those in the Hutton case. Their claim is not mathematically

ascertainable and their recovery may depend on the number and timing of claims filed. The question of

whether the common fund is an accurate quantification of the actual benefit that has been conferred exists

in this case just as it did in Goodrich.

{41} The Delaware Supreme Court rejected class counsel’s argument that they were being penalized

because their fee was being conditioned on practical problems in administering the fund and events

beyond their control, holding:

Goodrich’s arguments demonstrate the equity in the Court of Chancery’s decision. The

condition precedent to invoking the common fund doctrine is a demonstration that a common

benefit has been conferred. The Court of Chancery expressed concern about whether the

common fund was an accurate quantification of the actual benefit that had been conferred in

this case. By conditioning the award of attorney’s fees upon the claims actually submitted, the

Court of Chancery exercised its discretion equitably, to correlate the attorney’s compensation

with the structure of the settlement benefits the attorneys had negotiated for the class.

681 A.2d at 1049. (emphasis supplied).

{42} This Court concludes that North Carolina, like Delaware, would allow its trial judges to exercise their

discretion to tie attorney fees awards to actual benefits, especially where they had a concern whether the

common fund was an accurate quantification of the actual benefit conferred on the class, or where they

determined that it would be equitable to correlate the attorneys’ compensation with the structure of the

settlement benefits the attorneys had negotiated for the class.

III.

{43} Finally, the Court turns to the application of the above principles to the fee application in this

request.

A.

{44} The first step in using a multiple factor or hybrid test is to determine the benefit conferred upon the

class. The class may potentially receive a benefit of $20 million dollars. There is no assurance that the

settlement structure negotiated by class counsel will ultimately result in the full potential being reached.

To date, the results would indicate that the full potential will not be reached and there is the possibility

that the shortfall will be substantial. The Court concludes that at this time the common fund is not an

accurate quantification of the actual benefit conferred and that it would be more equitable to align counsel

fees with the actual benefits received while also giving counsel some credit for the potential recovery

created.

{45} To provide counsel with a fee of six million dollars without regard to the actual benefits conferred

thus far could create a situation in which counsel benefited far more than the class members. Such a

disparity is the kind of abuse the court must guard against. Horner, 236 N.C. 96, 72 S.E.2d 21. There is a

wide gap between the one million dollars in actual benefits received to date and the potential benefit of

twenty million dollars.

{46} A common benefit to class action litigation is that legitimate cases which might not otherwise be

pursued, due, for example, to prohibitive costs, can be heard. However, this is not a case in which claims

against the Settling Defendants might not ever have been brought except for the actions of class counsel.

The existence of the vast number of individual cases and the nature of what was at stake for homeowners

insured that claims would be brought whether or not the class action was filed. The benefits for class

members under the Settlement Agreement are similar to the benefits being obtained by homeowners in

mediation in individual suits.

{47} This settlement has created significant benefits for the class. The two benefits that class counsel have

created in this settlement distinct from the benefits in settlement of the individual cases are the elimination

of delay involved in the individual suit and the guaranty of payment for those who get their claims in

before the fund is exhausted. Acceleration and guaranty of payment are significant benefits for

homeowners facing the costs associated with repairing their homes. The settlement also has the salutary

effect for all concerned of treating all homeowners the same. This is not a "cost of litigation" settlement.

The potential dollar value is significant and a real benefit.

B.

{48} After analyzing the benefit to the class, the second step in using a multiple factor or hybrid test is to

examine the fee request against the reasonableness factors set forth in Rule 1.5 (b).

{49} Time and Labor Involved Analysis of this factor highlights one of the real difficulties in determining

the fee in connection with this settlement. Class counsel did not request a fee based upon a lodestar, and

thus did not file detailed time records, especially records from which the Court could determine how much

time and effort actually went into the prosecution of the case against the Settling Defendants. Rather, class

counsel have persisted in maintaining a posture that this is an industry wide case and any action taken

against any defendant in any jurisdiction was an action taken on behalf of the settlement class members in

this case. As Mr. William Audet, one of the attorneys for the class, stated in his affidavit: "Since early

1996, we have continued to prosecute these claims as "one" case, with various "subsidiary" cases pending

in various state and federal courts." (Audet Aff. of September 11, 1998, para. 5, at 3.)

{50} Under this "consortium" approach, any counsel time spent pursuing any claim against any EIFS

manufacturer would count towards the time and labor expended in reaching this settlement. The court does

not intend to use the word "consortium" in any pejorative sense. It is simply the best word the court has

found to describe the situation in which groups of lawyers affiliate for the purpose of establishing a

common liability across many jurisdictional lines on behalf of a large group of allegedly injured parties

and against a common defendant or defendants. The lawyers enter into agreements to share expenses, time

and effort, and rewards.

{51} In consortium litigation, defense counsel often develop the same degree of affiliation and share

expenses and labor involved in defending against the litigation in multiple jurisdictions. Class counsel in

this case have been involved in other cases in other states and in the federal courts. Extensive time and

effort went into a failed attempt at certification of a nationwide class in federal court. Enormous time and

effort went into trying to reach a comprehensive nationwide settlement against all defendants. A class

action attempt in Georgia failed. Some defendants have retained the same counsel and there has clearly

been a coordinated effort on the part of defense counsel in this case. Senergy represents only ten percent of

the market for these products, and there is no indication in the record that Senergy’s position in the

marketplace or in this case caused any unusual amount of time to be devoted to discovery of its defense.

Rather, common sense dictates that discovery and other legal efforts were allocated much as the market

share was allocated among the defendants. There is nothing in the record to indicate to the contrary. Thus,

in trying to evaluate the time and labor involved to fairly allocate the settlement fund between counsel and

the members of the settlement class (homeowners with claims against Senergy), the Court is left with the

following compilation from Mr. Shipman’s affidavit:

Through the month of July, 1998, the combined time of the lawyers and paralegals who have

worked on behalf of the Class Members in this case to date totals in excess of 45,000 hours.

The total time expended by lawyers totals just over 31,000 hours, and the total time expended

by paralegals totals just over 14,000 hours. Through the month of July 1998, the combined

expenses of Class Counsel, on behalf of Class Members is $2,653,910.00. Using the hourly

rates for those firms who have provided services to class members throughout the course of

this litigation, there are total lodestar fees of $11,784,104.19, which, together with the

expenses would compute to $14,438,017.29. The affidavits from the various attorneys who

have attested to the reasonableness of the fees sought by Class Counsel indicate that $350 per

hour would be a reasonable hourly rate for complex litigation of this type. However, if the

Court applied even a reduced hourly rate for attorneys of $250 per hour, and $50 per hour for

paralegals, then the total enhanced "lodestar" in this case including the combined expense

incurred by Class Counsel, would compute to $11,242,510.00.

(Shipman Aff. of September 11, 1998, at 2.)

{52} There is no detail from which to evaluate these numbers and the numbers are not allocated between

work for the original class as a whole and the members of the settlement class. Consortium litigation

raises many questions when it comes to fee issues. Was all the time reasonable? Were there too many

lawyers doing the same thing? What rates were charged by lawyers from different states and by lawyers

with differing degrees of experience and skill? What are the expenses claimed? Are they reasonable? How

much time and expense should be attributed to other cases and should these settlement class members bear

that cost? Was the cost of litigation adversely impacted by counsel’s decision to sue all defendants on

behalf of all homeowners, a strategy that has proved unsustainable in both state and federal courts? How

much counsel time was devoted to organization and resolution of issues between counsel? Did the lure of

the fee dictate the litigation strategy?

{53} It appears that at least some significant amount of class counsel’s time and effort was devoted to

establishing the "one case" or "consortium" model for this litigation as opposed to pursuit of claims against

the Settling Defendants. Were this Court required to decide the fee based solely upon a lodestar method,

the information supplied by class counsel would be insufficient to make the necessary determination.

However, the Court’s determination is not based solely on a lodestar method, and the information supplied

is adequate for the current purposes. Nor does the Court have to decide in this case at this time whether it

is appropriate to compensate counsel for creation of the "consortium" and for work done by other lawyers

in other cases in other jurisdictions against other defendants. It is worth noting at this juncture that class

counsel in cases similar to this would be well advised to maintain and submit to the court detailed time

records which would help the court answer the questions posed above and any similar questions.

{54} The Court finds that a blended hourly rate of $250 an hour is more than adequate to compensate for

the attorney time involved and that a rate of $50 an hour for paralegals is more than adequate. Thus, the

$11,243,510.00 lodestar mentioned in Mr. Shipman’s affidavit is the maximum that could be awarded on

a lodestar calculation for the entire case, accepting class counsel’s position that they are entitled to recover

all consortium time and expense. It is a possibility that the lodestar would actually be reduced upon a

more detailed filing and evaluation. Applying Senergy’s ten percent market share to the maximum

lodestar for the whole case yields a maximum lodestar for this portion of the case of $1,124,351.00. The

Court believes that a detailed analysis might yield a smaller, not a larger number for determining the time

and labor involved with this settlement and thus is satisfied that using that amount as a factor in this

determination is fair to class counsel. Class counsel have asked for a distribution of $6,000,000.00

compared to the $1,124,351.00 determined by the court to be a fair percentage of the total lodestar for the

entire case.

{55} The Court does not believe that class counsel in this case should be rewarded or penalized for the

"one case" or "consortium" organization of the claims against the defendants in connection with this fee

determination. It is difficult to say whether that strategy had a positive or negative effect on this

settlement. Based upon the record before the Court, it does not appear to have had any significant impact

either way. It may be that a single simple state class action lawsuit against Senergy would have produced

the same result with far less time and effort. Class counsel should not be rewarded when their litigation

strategy fails, for example where class counsel simply bring so many actions or consolidate so many

claims in various jurisdictions that "cost of litigation" settlements result which are not truly beneficial to

class members. Class counsel should be rewarded when their litigation strategy accomplishes tangible

results for class members that might not otherwise have been achieved. See this Court’s fee award in Byers

v. Carpenter, No. 94 CVS 04489 (Wake Co. Sup. Ct. (1998)) (Tennille, J.). Neither seems to have

occurred here. It is important to note here that this settlement was a nationwide settlement.

{56} Novelty and difficulty of the questions involved At its heart, this is a straightforward product

liability case. The issues of defective design and failure to warn are not novel or difficult. The discovery

needed is clearly ascertainable, even if it is voluminous.

{57} The complexity has resulted from (a) the plaintiffs’ industry wide approach and their effort to obtain

a judgment against all manufacturers at one time, (b) the defendants’ efforts to limit their liability to

individual state court lawsuits in which the contractor and other parties may be brought in to contribute

towards any liability to the homeowner, and (c) the inability of our judicial systems to come to grips with

the problems inherent in mass tort or product liability litigation. Thus far, the procedural battles in federal

and state courts have overshadowed the fight over substantive liability issues.

{58} The novel questions revolve around how our court systems will handle increasingly popular attempts

to impose industry wide liability or establish industry wide recovery funds in certain types of cases. On the

one hand, the federal courts seem to be retrenching from handling mass tort cases in nationwide class

actions, and returning those cases to state courts. See Amchem, 521 U.S. 591, 138 L. Ed. 2d 689;

Broussard v. Meineke Discount Muffler Shops, Inc., 155 F.3d 331 (4th Cir. 1998). See also Judge Britt’s

order in In Re Stucco Litigation, 175 F.R.D. 210 (E.D.N.C. 1997). On the other hand, technology has

made the coordination of large litigation across state lines more manageable for class counsel,

encouraging the consortium approach to what would have heretofore been treated as a nationwide class

action in federal court. The possibility of the megafee created by the establishment of the megafund serves

to encourage the consortium approach as well. As will be noted later, the risk can also be spread more

widely among counsel. Consortium litigation also increases the settlement leverage available to class

counsel since it can dramatically increase the risks for defendants. Strong claims under one state’s laws

can be leveraged with weaker claims in other states. Consortium litigation often levels the playing field as

far as resources available to plaintiffs and defendants.

{59} Consortium litigation also places new burdens on state court systems that are not experienced or

equipped to handle such massive litigation and presents attorney fee issues with which state courts have

not previously had to deal. Because their jurisdiction is limited, state courts have far more difficulty

managing and controlling consortium litigation than federal courts. State court endorsements of

nationwide class action settlements are far more susceptible to challenge in other states than federally

endorsed settlements because each state will naturally and rightfully guard the interests of its citizens and

insure that they are not abridged by other state courts.

{60} The most difficult problem raised by consortium litigation is the heightened equitable scrutiny

required to protect the interests of absent class members. In the typical class action, absent class members

have their interests represented by parties and attorneys that they have not selected. Class representatives

and their counsel must not have a conflict of interest if they are to adequately and fairly represent absent

class members. The additional blending of the state class members’ claims with claims of class members

or individuals in other states adds another layer of difficulty. Now, absent class members have the added

worries that their claims might be compromised or the amount of their attorney fees from a common fund

affected by claims of other parties in other jurisdictions. While there can be many similarities in the causes

of action and proof required to establish liability, state laws differ in many respects. Statutes of limitation

and repose are good examples that are particularly applicable here. The potential for conflicts of interest

are patent, not latent, and the use of a lodestar approach recognizing consortium time raises significant

problems with respect to fairness for the settlement class members where only a portion of the consortium

case is being resolved. Settlement class members could be unfairly treated or they could get a windfall

depending on the situation in each case. In the typical case there is no one to represent the absent class

members when these problems arise. Fee requests in partial settlements of consortium litigation require

heightened scrutiny and the fees involved should be more closely aligned with the interests of and actual

benefit to the settlement class members. Where necessary, counsel should be appointed to represent the

absent class members in such fee petition situations.

{61} Requisite skill The complexity of consortium litigation requires a high degree of skill and dedication.

Organizational skill is a prerequisite to management of a case of this sort. The case has required mastery

of technical issues and information. The substantive law issues have been straightforward, but the

procedural issues have been difficult. The case has also required constant attention to legal and technical

developments. The defendants have fought vigorously to protect their interests and defend their positions,

both procedurally and substantively. The case has required both trial level and appellate skills as well as

mediation skills. Class counsel have been diligent and persistent in their efforts on behalf of class

members and demonstrated a high degree of skill and dedication in their representation.

{62} The likelihood, if apparent to the client, that acceptance of the particular employment will preclude

other employment by the lawyer This is not a case in which acceptance of this representation would create

a conflict preventing class counsel from representing parties they might otherwise serve. The possibility, if

not the likelihood, exists that development of expertise and a reputation in connection with synthetic

stucco issues would lead to other work, either in cases representing individual homeowners or in class

actions in other jurisdictions. The sole preclusion effect in this case stems from the amount of time

involved in properly representing the class. Both Mr. Shipman and Mr. Blount have filed affidavits

detailing the time commitment to this case that prevented them from performing services for and billing

other clients.

{63} The customary fee charged in the locality for similar legal services and whether the fee is fixed or

contingent Whether the fee is fixed or contingent is less significant in this type of case. In class actions,

the absent class members have not chosen their attorney and have had no chance to negotiate a fee

arrangement. They do not get to choose whether they would pay for the involvement of counsel from

outside the state and whether or not their interest would be tied to that of homeowners from other states.

This is not a typical product liability or personal injury case in which an individual decides whether to

share the risk and reward from individual litigation with the attorney and negotiates the fee arrangement.

Rather, the Court should look to fee awards in similar cases, not negotiated fees in dissimilar cases. This is

not a customary case. Nor does the court feel bound by any fee agreement with the class representatives.

Absent class members should not be bound by fee agreements of class representatives, regardless of the

degree of sophistication of the class representative.

{64} Consortium litigation poses one additional problem from a fee standpoint. It usually interjects into

the fee determination the evaluation of hourly rates charged by out of state attorneys. Those rates may or

may not be the same as the hourly rates normally charged by North Carolina attorneys for the same

services. It is difficult for a state court to evaluate the normalcy of fees charged in other jurisdictions. The

only safe harbor for trial courts is to evaluate fee requests on the basis of what lawyers in their specific

jurisdiction would charge for similar services. After all, it would be a highly unusual situation that

required use of out of state counsel because there was not a lawyer in North Carolina who was ready,

willing, and able to handle a particular type of litigation. Nor should North Carolina residents who did not

participate in the selection of counsel be automatically bound to pay rates that might be justified in some

other jurisdiction, but not in North Carolina. Out of state counsel are not conscripted into representing

North Carolina residents, but do so voluntarily. In some instances, their involvement may even result from

an agreement between consortium counsel which ends disputes among counsel. Their services should be

evaluated on the basis of what similarly situated North Carolina lawyers would charge on an hourly basis.

The best source for that information is the Annual Survey prepared by the North Carolina Bar

Association. In this case, class counsel have not provided the court with detailed information on their

hours or hourly rates, insisting instead on a consortium approach to the determination of attorney fees. The

court has used what information class counsel have supplied as a check against its fee determination in this

case with the belief that the information supplied represents the maximum possible lodestar and that the

fee award, if based solely on rates applicable in North Carolina, would be reduced from the lodestar

proffered by class counsel. The Court has taken into consideration the reality that industry wide, multiple

jurisdiction litigation carries with it more time and expense than would be incurred if the litigation were

pursued on a single state, single defendant basis.

{65} The time limitations imposed by the client or circumstances The principle time limitation imposed by

this litigation has been the fact that the claims of class members involve serious problems with their

personal residences. In order to assess and evaluate what to do about possible problems associated with the

use of synthetic stucco, homeowners need answers and a prompt resolution of their claims. Class counsel

have been under persistent and continuous pressure to get this case tried or resolved.

{66} The nature and length of the professional relationship with the client This factor is of little relevance

in this situation.

{67} The experience, reputation and ability of the attorneys In this case the court has found the skills,

reputation and abilities of counsel to be excellent. Lead trial counsel are experienced attorneys, and other

counsel have brought expertise to the resolution of many problems inherent in the settlement process. The

experience and ability demonstrated by class counsel have been of high quality.

{68} The amount involved and the results obtained The Court has already discussed many of the facts

relevant to this factor. A summary of the key facts follows. This was a good settlement that mirrored the

benefits being obtained from EIFS manufacturers in the individual lawsuits against contractors, EIFS

manufacturers, and others. Class counsel should be credited for creating the insured fund and early access

to relief for homeowners. The settlement negotiated did contain some unique and beneficial terms for

class members. The waiver of statutes of limitation and repose and the agreement that claims could be

pursued against Settling Defendants if the fund was exhausted were unusual and expanded the potential

benefits.

{69} The real benefit to the settlement structure negotiated by class counsel is still open to question, as is

the full amount of the benefits that will be claimed. The nature of the settlement structure and the response

thus far indicate that class counsel deserve to be paid for the time and expense incurred, but that the

awarding of any premium for their efforts should be aligned with the actual receipt of benefits by

settlement class members.

{70} The Court’s determination of an appropriate fee may also be impacted by the result of the remaining

portions of this litigation. If class counsel prevail against the other, larger defendants, the possibility of

creation of a megafund exists. That would implicate the use of lower percentage rates in awarding fees

against a larger total fund. If no other recovery is achieved for other homeowners, the Court’s view of the

quality of this settlement may change for the better. The Court should also insure that, if there are future

judgments against other defendants, the Settling Defendants are not treated less favorably than defendants

who fight to the bitter end. These Settling Defendants have come forward and attempted to reach a

compromise resolution that is beneficial to homeowners. This partial settlement dictates that some caution

be used in making a final determination of the full fee at this point. That is a factor that should be

considered in partial settlements in industry wide litigation in multiple jurisdictions. It should not be

ignored.

{71} Risk This is not a case about whether or not there would ever have been a determination of liability

on the part of Settling Defendants. The multitude of individual cases combined with what was at stake for

homeowners assured that the liability issues would be litigated. What this case has been about is (1)

whether or not that liability would be determined on an individual basis in what defendants refer to as

"residential construction" cases or on some broader basis that would obviate the necessity of proving

liability on the part of EIFS manufacturers in each of the individual cases, and (2) whether or not EIFS

manufacturers could be held liable for the full amount of damages, rather than a prorated share created

when responsibility is allocated among all the participants in the construction process found liable. The

key risk, then, consisted of establishing a cause of action pursuant to which all EIFS manufacturers could

be held liable without regard to the actions of contractors or others in the construction process. That was

and remains a significant risk. This settlement was a compromise of that risk which the Court believes was

beneficial to the settlement class members. It assured homeowners at least partial reimbursement for any

damage to their homes while leaving them free to pursue claims against others who might also be

responsible for the problems associated with the use of synthetic stucco on their homes. The risk also

existed and still exists that there will be a determination that EIFS manufacturers are not liable under any

theory.

C.

{72} Having considered the benefits to the class, the structure of the settlement, the hours and expenses

incurred by counsel on behalf of the class and the other factors set forth above, the Court has devised a fee

payment plan designed to align the fee with the structure of the settlement and equitably correlate the fee

with the actual and potential benefits to the class. At the same time, the payment plan permits the Court to

change the fee as this litigation and the settlement process evolves, rather than guessing about what may

happen. It also takes into consideration the possibility that class counsel may expend significant hours in

further representation of the settlement class. It gives the Settling Defendants the incentive to see that the

class counsel do not have to spend significant time on the case and incentive to hold down costs other than

payment of benefits. It provides incentive for class counsel to see that the maximum claims are made

against and paid by the Settlement Fund as soon as possible. Since this is a partial settlement of an

industry wide case involving multiple jurisdictions, neither a straight percentage of the fund nor a lodestar

method is particularly useful. A multiple factor approach correlating the fee to the actual benefit received

by the class is the more equitable basis for the fee award. Under the terms of this Order, class counsel will

receive approximately twenty percent (20%) of the first eleven million dollars paid out of the fund.

Whether that percentage should be raised or lowered when distributions reach eleven million dollars

should be determined at that time, when the situation is more fully developed. Class counsel get the

benefit of an initial payment which covers their maximum lodestar, and, if the settlement does not result in

a payout reaching eleven million dollars, their percentage may actually be higher than thirty percent of the

actual benefits paid out.

{73} Based upon the foregoing, it is hereby ORDERED:

1. 1. Class counsel shall be awarded an initial fee of one million

dollars ($1,000,000.00) plus interest at the statutory rate from the

date of the final order approving settlement to date of payment.

2. Beginning August 1, 1999, class counsel shall be paid monthly

from the fund a supplemental fee consisting of an amount equal

to ten percent (10%) of the total amount paid out of the fund for

the previous month for benefits to the class members and costs of

administration, exclusive of class counsel’s fees.

3. When the total amount paid out of the fund for benefits and costs

of administration (exclusive of attorney fees) reaches eleven

million dollars ($11,000,000.00), class counsel or Settling

Defendants may move the Court for a change in the percentage

of the supplemental fee based upon the circumstances existing at

that time. The Court also reserves the right to change the

supplemental fee at that time or any other time on its own

motion.

4. Nothing provided herein shall prevent class counsel from moving

for a modification in the fee if the amount of time and expense

required in the future to represent the interests of settlement

class members becomes excessive or burdensome or Settling

Defendants take any action which results in an unreasonable

demand on class counsel. In moving for a modification, class

counsel shall present detailed time records showing the time,

attorney, hourly rate and description of services to support the

modification.

5. The Court retains jurisdiction over the fee process in order to

provide such other and further relief as may prove just and

proper.

This 14th day of July, 1999.