Petition for Writ of Certiorari — Isaacson/Weaver Family Trust, Petitioner v. Fresno County Employees' Retirement Association, et al.

Supreme Court briefAug 21, 2019

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No. __________

IN THE

Supreme Court of the United States

ISAACSON/WEAVER FAMILY TRUST,

Petitioner,

—v.—

FRESNO COUNTY EMPLOYEES’ RETIREMENT ASSOCIATION

and BERNSTEIN LITOWITZ BERGER & GROSSMAN LLP,

Respondents.

ON PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES

COURT OF APPEALS FOR THE SECOND CIRCUIT

PETITION FOR A WRIT OF CERTIORARI

ERIC ALAN ISAACSON

Counsel of Record

LAW OFFICE OF

ERIC ALAN ISAACSON

6580 Avenida Mirola

La Jolla, California 92037-6231

(858) 263-9581

ericalanisaacson@icloud.com

Counsel of Record for Petitioner

Isaacson/Weaver Family Trust

QUESTIONS PRESENTED

This Court’s decisions hold that whenever Congress

has authorized the award of “a reasonable attorney’s

fee,” this means “a fee sufficient to induce capable

counsel to take a meritorious ... case,” and that “the

lodestar method yields a fee that is presumptively

sufficient

achieve

this

objective,”

with

enhancements of an attorney’s lodestar fee permitted

only in “rare” and “exceptional” circumstances.

Perdue v. Kenny A. ex rel. Winn, 559 U.S. 542, 552

(2010). The federal securities laws contain several

such fee provisions. See, e.g., 15 U.S.C. §§77k(e), 77z1(c), 78i(f), 78r(a), 78u-4(a)(8), 78u-4(c).

Upon the settlement of this federal securities class

action, however, the district court awarded plaintiffs’

counsel 25% of the settlement fund, amounting to

nearly 40% more than the attorneys’ claimed lodestar.

The Second Circuit affirmed, holding that because

they involve fee-shifting statutes, this Court’s

decisions defining “a reasonable attorney’s fee,”

cannot constrain the award of an attorney’s fee

assessed against a class-action common-fund

settlement.

The questions presented are:

1. Do this Court’s decisions defining “a reasonable

attorney’s fee” in fee-shifting cases also constrain a

district court’s discretion in awarding “reasonable

attorneys’ fees” under Federal Rule of Civil Procedure

23(h) from a common-fund settlement?

2. Are the securities laws’ provisions relating to the

award of “a reasonable attorney’s fee” subject to the

rule of Perdue that a reasonable attorney’s fee

ordinarily will be limited to the lawyers’ unenhanced

lodestar?

PARTIES TO THE PROCEEDING

The parties to the proceeding before the United

States Court of Appeals for the Second Circuit are the

Isaacson/Weaver Family Trust, a class member bound

by the settlement of this matter that appeared as an

objector before the district court, and the Fresno

County Employees’ Retirement Association, which

was the court-appointed lead plaintiff before the

district court.

As the fees awarded from a common fund belong to

the counsel claiming the fees from the fund, see

Central Railroad & Banking Co. v. Pettus, 113 U.S.

116, 124-25 (1885), the lead plaintiff’s counsel were

the real parties in interest in proceedings before the

Court of Appeals. Thus, the law firm of Bernstein

Litowitz Berger & Grossmann LLP, also is named as

a respondent before this Court.

iii

TABLE OF CONTENTS

Page

QUESTIONS PRESENTED..........................................i

PARTIES TO THE PROCEEDINGS...........................ii

TABLE OF CONTENTS..............................................iii

PETITION FOR A WRIT OF CERTIORARI...............1

REPORTS OF THE OPINIONS BELOW....................1

JURISDICTION............................................................1

STATUTES AND RULES INVOLVED........................2

STATEMENT OF THE CASE......................................5

REASONS FOR GRANTING THE WRIT.................12

I. When Claims are Asserted Under a Statutory Fee Shifting Regime the Meaning of “A

Reasonable Attorney’s Fee” Should Not Vary

Radically Depending on Who Ultimately Pays

the Fee.....................................................................12

II. This Court’s Common-Fund and EquitableFund Precedents, Like its Statutory Fee-Shifting

Decisions, Limit Attorney’s Fees to what is

Reasonably Necessary to Compensate the

Lawyers...................................................................18

III. This Court Has Made Clear that Costs

Statutes Do Not Limit Common-Fund Fee

Awards Precisely Because They Do Not Purport

to Define a Reasonable Attorney’s Fee...................22

TABLE OF CONTENTS—Continued

Page

CONCLUSION............................................................30

APPENDIX TO THE PETITION...............................1a

Appendix A – Decision of the United States Court

of Appeals for the Second Circuit (May 23,

2019).............................................................................1a

Appendix B – Judgment of the U.S. Court of

Appeals for the Second Circuit (May 23,

2019)...........................................................................19a

Appendix C – Decision Opinion of the District

Court Awarding Attorney’s Fees..............................21a

Appendix D – Decision of the District Court

Approving Class-Action Settlement..........82a

Appendix E – Statues and Rules Involved...............93a

Federal Rule of Civil Procedure 23(h)..................93a

Securities Act of 1933 §11(e),

15 U.S.C. §77k(e)...............................................94a

Securities Act of 1933 §27(c),

15 U.S.C. §77z-1(c)............................................95a

Securities Exchange Act of 1934 §9(f),

15 U.S.C. §78i(f).................................................98a

Securities Exchange Act of 1934 §10(b),

15 U.S.C. §78j(b)................................................99a

TABLE OF CONTENTS—Continued

Page

Securities Exchange Act of 1934 §18(a),

15 U.S.C. §78r(a)...............................................99a

Securities Exchange Act of 1934 §21D(a)(8),

15 U.S.C. §78u-4(a)(8).........................................101a

Securities Exchange Act of 1934 §21D(c),

15 U.S.C. §78u-4(c)..........................................101a

TABLE OF AUTHORITIES

Page

Cases

Alyeska Pipeline Service Co v. Wilderness Society,

421 U.S. 240 (1975)...........................................12, 24

Arbor Hill Concerned Citizens Neighborhood Ass’n

v. County of Albany,

522 F.3d 182 (2d Cir. 2008).....................................22

Barnett v. Equitable Trust Co.,

34 F.2d 916 (2d Cir. 1929), aff’d in part and rev’d

in part, United States v. Equitable Trust Co.,

283 U.S. 738 (1931).................................................20

Blum v. Stenson,

465 U.S. 886 (1984).................................................13

Boeing Co. v. Van Gemert,

444 U.S. 472 (1980).................................................19

In re BioScrip, Inc. Sec. Litig.,

273 F.Supp.3d 474 (S.D.N.Y. 2017)..........................1

In re Bioscrip Inc. Sec. Litig.,

95 F.Supp.3d 711 (S.D.N.Y. 2015)............................1

City of Burlington v. Dague,

505 U.S. 557 (1992)................................13, 26, 29-30

Central Railroad & Banking Co. v. Pettus,

113 U.S. 116 (1885)..........................iii, 13, 19, 20, 21

Confederated Bands of Ute Indians v. United States,

120 Ct.Cl. 609 (1951)...............................................22

vii

TABLE OF AUTHORITIES—Continued

Page

Cyan, Inc. v. Beaver County Employees Ret. Fund,

138 S.Ct. 1061 (2018)..............................................29

Faig v. BioScrip, Inc.,

2013 WL 6705045 (S.D.N.Y. Dec. 19, 2013).............1

Farmers & Merchants Nat’l Bank v. Peterson,

5 Cal. 2d 601, 55 P.2d 867 (Cal. 1936)...................21

Florin v. Nationsbank of Ga., N.A.,

34 F.3d 560 (7th Cir. 1994).....................................15

Fresno County Employees’ Retirement Association

v. Isaacson/Weaver Family Trust,

925 F.3d 63 (2d Cir. 2019).........................................1

Haggart v. Woodley,

809 F.3d 1336 (D.C. Cir. 2016)...............................15

Harris v. Chicago Great W. Ry.,

197 F.2d 829 (7th Cir. 1952)...................................21

Harrison v. Perea,

168 U.S. 311 (1897).................................................21

Herman & MacLean v. Huddleston,

459 U.S. 375 (1983).................................................27

Illinois Bell Tel. Co. v. Slattery,

102 F.2d 58 (7th Cir. 1939).....................................21

International Federatio of Flight Attendants v. Zipes,

491 U.S. 754 (1989).................................................26

viii

TABLE OF AUTHORITIES—Continued

Page

Johnson v. Georgia Highway Express, Inc.,

488 F.2d 714 (5th Cir. 1974)..............................17-18

Kerr v. Screen Extras Guild, Inc.,

526 F.2d 67 (9th Cir. 1975).....................................17

Lampf, Pleva, Lipkind, Prupis & Petigrew

v. Gilbertson, 501 U.S. 350 (1991).................4, 27-28

Maley v. Del Global Techs. Corp.,

186 F.Supp.2d 358 (S.D.N.Y. 2002)........................10

McDaniel v. County of Schenectady,

595 F.3d 411 (2d Cir. 2010).....................................22

Muransky v. Godiva Chocolatier, Inc.,

922 F.3d 1175 (11th Cir. 2019)....................15, 17-18

Murphy v. Smith,

138 S.Ct. 784 (2018)................................................17

Musick, Peeler & Garret v. Employers Ins. of Wausau,

508 U.S. 286 (1993)........................................4, 27-28

NLRB v. SW General, Inc.,

137 S.Ct. 929 (2017)................................................29

Octane Fitness LLC v. ICON Health and Fitness, Inc.,

572 U.S. 545 (2014).................................................27

Pennsylvania v. Delaware Valley Citizens’ Council

for Clean Air,

478 U.S. 546 (1986) (Delaware Valley I ).........13, 17

TABLE OF AUTHORITIES—Continued

Page

Pennsylvania v. Delaware Valley Citizens’ Council

for Clean Air,

483 U.S. 711 (1987) (Delaware Valley II)..............13

Perdue v. Kenny A. ex rel. Winn,

559 U.S. 542 (2010)........................i, 7-8, 9-15, 17, 24

Pierce v. Visteon Corp.,

791 F.3d 782 (7th Cir. 2015)...................................15

Rawa v. Monsanto Co.,

___F3d___, 2019 WL 3916537

(8th Cir. Aug. 20, 2019)...........................................17

S.S. Body Armor I., Inc. v. Carter Ledyard &

Milburn LLP,

927 F.3d 763 (3d Cir. 2019).....................................16

Sinotech Energy Ltd.,

2013 WL 11310686 (S.D.N.Y. Sept. 4, 2013).........10

Sprague v. Ticonic Nat. Bank,

307 U.S. 161 (1939)...................................................2

Staton v. Boeing Co.,

327 F.3d 938 (9th Cir. 2003)..................................15

Steiner v. American Broadcasting Co.,

248 Fed. App’x 780 (9th Cir. 2007).........................17

In re Telik, Inc. Sec. Litig.,

576 F.Supp.2d 570 (S.D.N.Y. 2008)........................10

TABLE OF AUTHORITIES—Continued

Page

Trustees v. Greenough,

105 U.S. 527 (1882).......................2, 13, 19-20, 24-25

U.S. Airways, Inc. v. McCutchen,

569 U.S. 88 (2013)...................................................19

Union Asset Mgt. Holding A.G. v. Dell, Inc.,

669 F.3d 632 (5th Cir. 2012)...................................18

United States v. Equitable Trust Co.,

283 U.S. 738 (1931)................................13, 14, 20-21

Vizcaino v. Microsoft Corp.,

290 F.3d 1043 (9th Cir. 2002)..............................16

Wal-Mart Stores, Inc. v. Visa U.S.A., Inc.,

396 F.3d 96 (2d Cir. 2005).................................10, 16

Western Federal Corp. v. Erickson,

739 F.2d 1439 (9th Cir. 1984).................................27

Court Records

Brief for Respondents to Whom Allowances

Were Made, United States v. Equitable Trust,

283 U.S. 738, [Oct. Term 1929 No. 530]

(filed April 16, 1930)................................................21

Transcript of Record, Trustees v. Greenough,

No. 601 (1881)..........................................................20

TABLE OF AUTHORITIES—Continued

Page

Statutes and Rules

Securities Act of 1933

§11, 15 U.S.C. §77k.............................................5, 28

§11(e), 15 U.S.C. §§77k(e)............................i, 3, 8, 26

§12(a)(2), 15 U.S.C. §77l(a)(2)...............................5, 6

§15(a), 15 U.S.C. §77o...........................................5, 6

§22(a), 15 U.S.C. §77v(a)...........................................1

§27(c), §77z-1(c)......................................................i, 5

Securities Exchange Act of 1934

§9, 15 U.S.C. §78i..............................................27, 28

§9(f), 15 U.S.C. §78i(f)........................i, 3, 4, 8, 27, 28

§10(b), 15 U.S.C. §78j(b)..........................3-4, 5, 6, 27

§18, 15 U.S.C. §78r(a).............................................28

§18(a), 15 U.S.C. §78r(a)........................i, 4, 8, 27, 28

§20(a), 15 U.S.C. §78t(a).......................................5, 6

§21D(a)(8), 15 U.S.C. §78u-4(a)(8)...i, 4-5, 8-9, 28-29

§21D(c), 15 U.S.C. §78u-4(c)...........................1, 5, 29

§27(a), 15 U.S.C. §78aa(a).........................................1

28 U.S.C. §1254(1).........................................................2

28 U.S.C. §1291.............................................................2

28 U.S.C. §1331.............................................................1

28 U.S.C. §1923(a)..................................................23-24

42 U.S.C. §1988.............................................................8

Act of Feb. 26, 1853, ch. 80, 10 Stat. 161..............23-24

Rules of the Supreme Court

Rule 14.1(f).................................................................2

xii

TABLE OF AUTHORITIES—Continued

Page

Federal Rules of Civil Procedure

Rule 11.....................................................................29

Rule 23(h)..........................................................6-7, 8,

Rule 23(h)(2)..............................................................7

S.E.C. Rule 10b-5, 17 CFR §240.10b-5.........................6

Legislative History

H.R. Conf. Rep. No. 104-369, at 40 (1995).................28

Secondary Authorities

Anne Ashmore,

Dates of Supreme Court Decisions and Arguments: United States Reports Volumes 2-107

(1791-1882) (Washington, D.C.: Library of

the Supreme Court of the United States,

August 2006)............................................................19

John P. Dawson,

Lawyers and Involuntary Clients: Attorney

Fees From Funds,

87 Harv. L. Rev. 1597 (1974)..................................19

PETITION FOR A WRIT OF CERTIORARI

The Isaacson/Weaver Family Trust (“the Family

Trust”) respectfully petitions for a writ of certiorari to

review the judgment of the United States Court of

Appeals for the Second Circuit in this case.

REPORTS OF THE OPINIONS BELOW

The Second Circuit’s opinion is published as Fresno

County Employees’ Retirement Association v.

Isaacson/Weaver Family Trust, 925 F.3d 63 (2d Cir.

2019), and is reproduced in the Appendix hereto at

Pet. App. 1a-18a.

The Second Circuit affirmed a district court opinion

that is published as In re BioScrip, Inc. Sec. Litig.,

273 F.Supp.3d 474 (S.D.N.Y. 2017), and appears in

the Appendix hereto at Pet. App. 21a-81a.

The district court’s earlier decision approving the

class-action settlement is not reported, but is

reproduced in the Appendix hereto at Pet.App. 82a92a.

The district court’s order consolidating cases, and

appointing the lead plaintiff and lead counsel for the

class action is reported as Faig v. BioScrip, Inc., 2013

WL 6705045 (S.D.N.Y. Dec. 19, 2013), and its order

denying a motion to dismiss is published as In re

Bioscrip Inc. Sec. Litig., 95 F.Supp.3d 711 (S.D.N.Y.

2015).

JURISDICTION

The district court exercised jurisdiction over this

federal securities-law class action under Securities

Act of 1933 §22(a), 15 U.S.C. §77v(a), under Securities

Exchange Act of 1934 §27(a), 15 U.S.C. §78aa(a), and

under 28 U.S.C. §1331.

That court’s order awarding common-fund

attorney’s fees is a final appealable order, supporting

appellate jurisdiction in the Court of Appeals and

before this Court. Sprague v. Ticonic Nat. Bank, 307

U.S. 161, 169 (1939); Trustees v. Greenough, 105 U.S.

527, 531 (1882).

The district court issued its order awarding

attorney’s fees on July 26, 2017, see Pet.App. 81a, and

on August 24, 2017, the Isaacson/Weaver Family

Trust timely filed a notice of appeal from that order.

C.A.App. APP0429.

The Second Circuit exercised jurisdiction under 28

U.S.C. §1291, issuing a decision and judgment

affirming the ruling below on May 23, 2019. See

Pet.App. 1a-19a, 20a-21a.

This Court has jurisdiction under 28 U.S.C.

§1254(1) to review, by writ of certiorari, the decision

of the Second Circuit.

STATUTES AND RULES INVOLVED1

Federal Rule of Civil Procedure 23(h) authorizes

the district court in a certified class action, such as

this, to “award reasonable attorney’s fees and

nontaxable costs that are authorized by law or by the

parties’ agreement.” Rule 23(h); Pet.App. 93a.

The underlying claims are asserted under

provisions of the federal Securities Act of 1933

(“Securities Act” or “1933 Act”) and the Securities

Exchange Act of 1934 (“Exchange Act” or “1934 Act”).

Those acts contain several provisions concerning

1 Because of their length, the relevant statutes and rules are

here cited, with excerpts and summaries of pertinent

portions, while the full texts printed in the Appendix

pursuant to Rule 14.1(f). See Pet.App. at 93a-104a.

authorizing the award of “a reasonable attorney’s fee”

in federal securities cases, which are set forth in the

Appendix hereto. Pet.App. 93a-104a.

These include Securities Act of 1933 §11(e), 15

U.S.C. §77k(e), authorizes courts to award

“reasonable attorney’s fees” in any 1933 Act case if

the suit or a defense is found to be “without merit.”

Pet.App. 95a-95a.

Originally designated as §9(e), what is currently

codified as Securities Exchange Act 9(f), 15 U.S.C.

§78i(f), authorizes private actions to redress

manipulation of securities markets and further

provides:

In any such suit the court may, in its

discretion, require an undertaking for the

payment of the costs of such suit, and assess

reasonable costs, including reasonable attorneys’

fees, against either party litigant.

15 U.S.C. §78i(f).

Securities Exchange Act of 1934 §10(b), 15 U.S.C.

§78j(b), makes it

unlawful for any person, directly or indirectly, by

the use of any means or instrumentality of

interstate commerce or of the mails, or of any

facility of any national securities exchange—

***

(b) To use or employ, in connection with

the purchase or sale of any security

registered on a national securities exchange

or any security not so registered, or any

securities-based swap agreement any

manipulative or deceptive device or

contrivance in contravention of such rules

and regulations as the Commission may

prescribe as necessary or appropriate in the

public interest or for the protection of

investors.

15 U.S.C. §78j(b).2

Securities Exchange Act §18, 15 U.S.C. §78r, which

provides a private cause of action against persons

who cause a false or misleading statement to be made

in documents filed with the Securities and Exchange

Commission, also provides: “In any such suit the

court may, in its discretion, require an undertaking

for the payment of the costs of such suit, and assess

reasonable costs, including reasonable attorneys’ fees,

against either party litigant.” 15 U.S.C. §78r(a); see

Pet.App. 99a-100a.

Securities Exchange Act §21D(a)(8), 15 U.S.C.

§78u-4(a)(8), authorizes district courts to require

security for the award of attorneys’ fees in any 1934

Act case certified as a class action:

(8) Security for payment of costs in class

actions In any private action arising under this

chapter that is certified as a class action

2 Although §10(b) contains no provisions relating to a private

cause of action—no limitations period, no provision for

awarding attorney’s fees, or for contribution among

defendants’ jointly liability—this Court has long recognized

an implied cause of action, incorporating appurtenant

provisions from the federal securities laws’ express causes of

action. See Lampf, Pleva, Lipkind, Prupis & Petigrew v.

Gilbertson, 501 U.S. 350, 358-64 & n.9 (1991) (adopting

limitations period from 1934 Act §9); Musick, Peeler & Garret

v. Employers Ins. of Wausau, 508 U.S. 286, 294-97 (1993)

(adopting contribution among jointly liable tortfeasors from

1934 Act §§9, 18); see also infra at 27-28.

pursuant to the Federal Rules of Civil Procedure,

the court may require an undertaking from the

attorneys for the plaintiff class, the plaintiff

class, or both, or from the attorneys for the

defendant, the defendant, or both, in such

proportions and at such times as the court

determines are just and equitable, for the

payment of fees and expenses that may be

awarded under this subsection.

15 U.S.C. §78u-4(a)(8) (emphasis added).

Securities Act §27(c), 15 U.S.C. §77z-1(c), and

Exchange Act §21D(c), 15 U.S.C. §78u-4(c), both

mandate findings upon entry of final judgment in any

private action under the 1933 Act or 1934 Act,

respectively, concerning the parties’ compliance with

Rule 11, mandating a presumption that an award of

reasonable attorney’s fees is the appropriate sanction

if violations of Rule 11 are found. See 15 U.S.C.

§§77z-1(c), 78u-4(c).

STATEMENT OF THE CASE

As the Second Circuit’s opinion below explains, this

appeal arose following the settlement of a federal

securities class action alleging claims under sections

11, 12(a)(2), and 15 of the Securities Act of 1933

(“Securities Act” or “1933 Act”), 15 U.S.C. §§77k,

77l(a)(2), 77o, as well as claims under sections 10(b)

and 20(a), 15 U.S.C. §§78j(b), 78t(a), of the Securities

Exchange Act of 1934 (“Exchange Act” or “1934 Act”).

See Pet.App. 4a.

The plaintiffs asserted strict-liability and

negligence-based claims under 1933 Act §11, 15

U.S.C. §77k, on behalf of class members (such as the

Family Trust) who acquired registered securities

issued pursuant to BioScrip securities’ allegedly false

and misleading registration statement. They asserted

claims under 1933 Act §12(a)(2), 15 U.S.C. §77l(a)(2),

on behalf of class members (such as the Family Trust)

who acquired securities sold pursuant to an allegedly

false or misleading prospectus. They also asserted

vicarious “control person” claims under §15(a), 15

U.S.C. §77o(a).

Supplementing the 1933 Act claims, the plaintiffs

asserted claims under the implied cause of action

provided by 1934 Act §10(b), 15 U.S.C. §78j(b), for

violations of S.E.C. Rule 10b-5, 17 CFR §240.10b-5,

which proscribes false or misleading statements as

well as any manipulative or deceptive device or

contrivance employed in connection with the purchase

or sale of any security. To these primary-liability

claims they appended vicarious-liability “control

person” claims under 1934 Act §20(a), 15 U.S.C.

§78t(a).

After discovery had begun, but before a class was

certified, the parties entered a settlement under

which BioScrip agreed to pay $10.9 million to settle

the class-action lawsuit. Lead Counsel asserted that

the

$10.9

million

settlement

“represents

approximately 17%-28% of the Settlement Class’s

estimated maximum recoverable damages.” C.A.App.

APP0267 (fee brief).

The Settlement Agreement provided that Lead

Counsel could apply for an award of attorney’s fees

from the $10.9 million Settlement Fund. See Pet.App.

4a.

Following preliminary approval of the proposed

settlement and notice to the class, Lead Counsel

applied for a fee award under Federal Rule of Civil

Procedure 23(h), which provides: “In a certified class

action, the court may award reasonable attorney’s fees

and nontaxable costs that are authorized by law or by

the parties’ agreement.” Fed.R.Civ.P. 23(h) (emphasis

added). Lead Counsel asked the district court to

award an attorney’s fee amounting to 25% of the

$10.9 million settlement fund—i.e., for an attorney’s

fee award of $2,725,000—plus interest. See Pet. App.

4a-5a; C.A.App. APP0242 (fee brief). Lead Counsel

urged the district court to apply to calculate the

attorney’s fees as a percentage of the settlement fund,

acknowledging that the requested 25% attorney’s fee

award of $2.725 million amounted to a 1.39 multiplier

of Lead Counsel’s lodestar—or nearly 40% more than

the lawyers’ regular hourly rates. C.A.App. APP025051, 0258 (fee brief).

The Isaacson/Weaver Family Trust—a member of

the class with standing to assert both 1933 Act and

1934 Act claims based on its purchase of BioScrip

common stock in BioScrip’s April 18-19, 2013

registered stock offering—filed an objection, limited to

the attorney’s fee application, as authorized by

Federal Rule of Civil Procedure 23(h)(2)) (a “class

member, or a party from whom payment is sought,

may object to the motion”). C.A.App. at APP0323-346

(objection); C.A.App. at APP0369-382 (supplemental.

Brief).

The Family Trust’s objection pointed out that this

Court had addressed the meaning of “a reasonable

attorney’s fee” in Perdue v. Kenny A. ex rel. Winn, 559

U.S. 542, 546 (2010), a contingent-fee class action

involving the settlement, by means of a mediated

consent decree, of claims that were subject to

statutory fee-shifting provisions.3

See id. at 547 (“The consent decree resolved all pending

issues other than the fees that respondent’s attorneys were

The Family Trust contended that an award of

“reasonable attorney’s fees” under Rule 23(h) in this

case should be constrained this Court’s decisions,

such as Perdue, which specifically concern the

meaning of “a reasonable attorney’s fee.” Those

decisions hold that whenever Congress has

authorized the award of “a reasonable attorney’s fee,”

these words mean “a fee sufficient to induce capable

counsel to take a meritorious ... case.” Perdue, 559

U.S. at 552. They hold that “the lodestar method

yields a fee that is presumptively sufficient to achieve

this objective,” and that attorney’s fees exceeding the

attorney’s unenhanced lodestar thus are permitted

only in “rare” and “exceptional” circumstances.

Perdue, 559 U.S. at 552. Thus, this Court’s decisions

hold, “there is a strong presumption that the lodestar

is sufficient” compensation for class-action attorneys.

Perdue, 559 U.S. at 546; see C.A.App. at APP0323-33

(objection); APP0374-82 (supplemental brief).

The Family Trust’s objection also pointed to the

federal securities laws’ overarching regime of fee

shifting provisions, under which the sections creating

the 1933 and 1934 Acts’ primary rights of action

authorize courts, in appropriate cases, to award

“reasonable attorney’s fees.” See, e.g., 1933 Act §11(e),

15 U.S.C. §77k(e), 1934 Act §9(f), 15 U.S.C. §78i(f),

1934 Act §18(a), 15 U.S.C. §78r(a). Congress has

specified in 1934 Act §21D(a)(8), moreover, that

district courts may shift fees in any 1934 Act case

that is certified as a class action: “In any private

action arising under this chapter that is certified as a

entitled to receive under 42 U.S.C. §1988.”); see also id. at 569

(Breyer, J., dissenting: “‘[T]he settlement achieved by

plaintiffs’ counsel is comprehensive in its scope and detailed

in its coverage ....’”) (citation omitted).

class action ... the court may require an undertaking

... for the payment of fees and expenses that may be

awarded under this subsection.” 15 U.S.C. §78u4(a)(8). Pet.App. 101a.

Given the presence of numerous fee-shifting

provisions in the federal securities laws, under which

“a reasonable attorney’s fee” would presumptively be

limited to the attorney’s unenhanced lodestar, the

Family Trust argued that class counsel should not be

able to obtain a larger-than-lodestar fee award by

settling claims and seeking fees from the commonfund settlement. The Family Trust asserted that

awarding more generous fees to counsel who settle

claims than they would receive for winning the case

and applying for fees to be awarded under statutory

fee-shifting provisions produces perverse incentives to

abandon the class’s interest in favor of a more

generous fee award.

The district court held a settlement-fairness

hearing on June 13, 2016, at which counsel for the

Settling Parties and the Family Trust appeared and

were heard. C.A. App. at APP0394(DE125) (hearing

transcript). The district court approved the proposed

settlement with an order entered June 16, 2016.

Pet.App. 82a-92a.

More than a year later, on July 26, 2017, the

district court entered its Order overruling the Family

Trust’s objections and granting the challenged motion

for attorney’s fees. Pet.App. 21a-81a. The district

court held that Perdue’s “presumption against a

lodestar enhancement ... when a court awards a

reasonable attorney’s fee from a defendant pursuant

to a fee-shifting provision does not apply to the award

of fees in this case from a common fund created after

a settlement.” Pet.App. 27a. Acknowledging that

“[t]he Objector’s argument is not without force,” the

district court nonetheless held that the this Court’s

definition of “a reasonable attorney’s fee” in feeshifting cases such as Perdue “does not apply in the

context of an award of fees from a settlement fund,

even if a statute would permit a party to otherwise

seek a statutory fee award directly from a defendant.”

Pet.App. 32a. The district court also held that “no

claim settled in this case contains a fee-shifting

provision analogous to that at issue in Dague and

Perdue.” Pet.App. 49a.

It then approved an attorney’s fee award

amounting to a 39% enhancement of the attorney’s

lodestar, noting that when settlements have produced

a common fund, courts commonly award attorney’s

fees amounting to several times the lawyer’s lodestar.

As the district court put it:

There is no question that Lead Counsel’s lodestar

multiplier of 1.39 is at the lower range of

comparable awards in common fund cases. See

Sinotech Energy Ltd., 2013 WL 11310686, at *8

[(S.D.N.Y. Sept. 4, 2013)] (collecting examples of

courts awarding lodestar multipliers of “between

four and five”); In re Telik, Inc. Sec. Litig., 576

F.Supp.2d 570, 590 (S.D.N.Y. 2008) (“[L]odestar

multiples of over 4 are routinely awarded.”);

Maley v. Del Global Techs. Corp., 186 F.Supp.2d

358, 369 (S.D.N.Y. 2002) (noting that multiplier

of 4.65 was “well within the range awarded by

courts in this Circuit and courts throughout the

country”); see also Wal-Mart Stores, Inc. [v. Visa

U.S.A., Inc.], 396 F.3d [96] at 123 [(2d Cir. 2005)]

(noting that, although in a megafund case, the

lodestar multiplier of 3.5 “ha[d] been deemed

reasonable under analogous circumstances”); Pl.

Mem. at 9-10 & n.8 (collecting numerous cases).

Pet.App. 66a.

On August 24, 2017, the Family Trust timely filed

a notice of appeal from the district Court’s July 26,

2017, Order awarding attorney’s fees. C.A.App at

APP0429.

The Second Circuit affirmed, holding that it does

not matter whether the federal securities’ laws’ feeshifting provisions are analogous to those involved

this Court’s fee-shifting decisions, such as Perdue.

The Court of Appeals “hold[s] that, even if a case is

brought pursuant to a fee-shifting statute, commonfund principles control fee awards authorized from a

common fund, and a common-fund fee award may be

calculated as the lodestar or as a percentage of the

common fund.” Pet.App. 3a-4a. Common-fund awards

thus are not constrained by this Court’s precedents

defining “a reasonable attorney’s fee.” Pet.App. 3a4a.

The Second Circuit held that “regardless of

whether a case is brought pursuant to a statute with

a fee-shifting provision, if the parties settle the case

by creating a common fund, common-fund principles

control class counsel’s fee recovery,” Pet.App. 6a, and

“offer[ed] no opinion on whether the statutes

pursuant to which the underlying case arose contain

applicable fee-shifting provisions.” Pet.App. 6a.

“Where a litigant acts as a private attorney

general,” the Second Circuit explained, this Court has

held that “the goal of fee shifting is to provide ‘a fee

that is sufficient to induce a capable attorney to

undertake the representation of a meritorious . . .

case.’” Pet.App. 7a (quoting Perdue, 559 U.S. at 552.

The Second Circuit acknowledged, moreover, that this

Court holds an unenhanced lodestar award achieves

that goal: “When a statute’s fee-shifting provision

authorizes a reasonable attorneys’ fee, the Supreme

Court has held that ‘the lodestar method yields a fee

that is presumptively sufficient.’” Pet.App. 7a

(quoting Perdue, 559 U.S. at 552).

Yet it concluded that in class actions producing a

common fund settlement, district courts are free to

ward substantially more than what is, according to

this Court’s decisions, “sufficient to induce a capable

attorney to undertake the representation.” Pet.App.

7a (quoting Perdue, 559 U.S. at 552). For, it

concluded, “the Supreme Court has placed greater

restrictions on attorneys’ fees recovered from

statutory fee-shifting provisions than on fees

recovered from common funds.” Pet.App. 7a.

REASONS FOR GRANTING THE WRIT

When Claims are Asserted Under a

Statutory Fee Shifting Regime the

Meaning of “A Reasonable Attorney’s Fee”

Should Not Vary Radically Depending on

Who Ultimately Pays the Fee

This case concerns the effect of this Court’s

decisions concerning what is “a reasonable attorney’s

fee” in cases arising under two exceptions to “the

general ‘American rule’” that a party bears its own

attorney’s fees, Alyeska Pipeline Service Co v.

Wilderness Society, 421 U.S. 240, 245 (1975), and

whether this Court’s definition of “a reasonable

attorney’s fee” in fee-shifting cases bears on fee

awards in class actions that settle for a common fund,

as this one did. See Pet.App. 6a.

The first exception to the American rule relevant

here is the “common-fund” or “equitable-fund”

doctrine, under which a court may award a

reasonable attorney’s fee either to a party, or directly

to its lawyers, because the lawyers’ work produced a

fund that benefits others. This Court has long allowed

such awards, provided they are “made with

moderation and a jealous regard to the rights of those

who are interested in the fund,” Trustees v.

Greenough, 105 U.S. 527, 536-37 (1882), and do not

exceed the “reasonable compensation for their

professional services,” Central Railroad & Banking

Co. v. Pettus, 113 U.S. 116 (1885) (cutting commonfund fee award in half, to just 5% of the fund), with

“special care ... taken to confine the fees to what was

reasonable.” United States v. Equitable Trust Co., 283

U.S. 738, 746 (1931) (cutting equitable-fund fee

award that the Second Circuit had approved in half,

to roughly 8% of the fund in question). This is a

common-fund case.

A second exception to the American rule, which has

produced a series of decisions from this Court

defining what is “a reasonable attorney’s fee,” arises

where Congress has provided by statute that courts

may (or must) order the payment of a prevailing

litigant’s attorney’s fees by another party.4 In feeshifting cases this Court holds that “a reasonable

attorney’s fee” generally means (and ordinarily is

limited to) the attorney’s unenhanced lodestar, “i.e.,

the number of hours worked multiplied by the

prevailing hourly rates,” because the prospect of a

4 See Blum v. Stenson, 465 U.S. 886, 895 (1984); Pennsylvania

v. Delaware Valley Citizens’ Council for Clean Air, 478 U.S.

546 (1986) (Delaware Valley I ); Pennsylvania v. Delaware

Valley Citizens' Council for Clean Air, 483 U.S. 711 (1987)

(Delaware Valley II); City of Burlington v. Dague, 505 U.S.

557 (1992); Perdue v. Kenny A. ex rel. Winn, 559 U.S. 542, 546

& 552 (2010).

simple lodestar award ordinarily is “sufficient to

induce a capable attorney to undertake the

representation of a meritorious ... case.” Perdue, 559

U.S. a7 546 & 552.

The Family Trust submits that this Court’s

decisions defining “a reasonable attorney’s fee” in feeshifting cases such as Perdue should constrain district

courts’ discretion in awarding fees from a commonfund settlement—particularly when the settled claims

arise under a statutory regime fee-shifting provisions

(as the federal securities laws do). Holding otherwise

ignores the constraints of this Court’s common-fund

jurisprudence, requiring courts to act as “jealous”

guardians, Greenough, 105 U.S. at 536-37, taking

“special care ... to confine the fees to what was

reasonable.” Equitable Trust, 283 U.S. at 746.

If as this Court has held in fee-shifting cases, “a

‘reasonable fee is a fee that is sufficient to induce a

capable attorney to undertake the representation of a

meritorious ... case” and, as this Court has further

held, the promise of a simple lodestar award “yields a

fee that is sufficient to achieve this objective,” Perdue,

559 F.3d at 552, then it should be clear that a district

court breaches its duty by awarding a much larger fee

merely because the case settled producing a common

fund. Indeed, allowing more generous fee awards—

amounting to substantial multipliers of their

lodestar—produces perverse incentives for lawyers to

settle their clients’ claims cheaply in order to enhance

their own incomes.

Asserting that “[f]ee-shifting principles and the

common-fund doctrine occupy separate realms,”

however, the Second Circuit held in this case that

judges awarding fees in a common-fund class action

are not constrained by this Court’s decisions defining

“a reasonable attorney’s fee” whenever those terms

have been used by Congress. Pet.App. 9a. It joins

several other circuits in so holding. See Pet.App. 11a

(“Our sister circuits have persuasively supported ...

rejection of the suggestion that statutory fee-shifting

principles curtail a district court’s discretion in

common-fund cases”); see id. at 11a-13a (following

Staton v. Boeing Co., 327 F.3d 938, 968 (9th Cir.

2003), and Florin v. Nationsbank of Ga., N.A., 34 F.3d

560, 565 (7th Cir. 1994)); accord Muransky v. Godiva

Chocolatier, Inc., 922 F.3d 1175, 1195 (11th Cir. 2019)

(“Perdue addresses fee-shifting statutes and says

nothing about the award of attorney’s fees from a

common fund.”).

The consequences of this holding are dramatic.

Under decisions such as Perdue, the lawyer’s

unenhanced lodestar provides the presumptively

reasonable fee award when claims are subject to

statutory fee shifting. Thus, lawyers taking a case

with claims subject to fee-shifting provisions know

that if they win at trial they will be obligated to apply

for fees under the fee-shifting statute and can expect

to receive only their lodestar without further

enhancement. See, e.g., Haggart v. Woodley, 809 F.3d

1336, 1358-69 (D.C. Cir. 2016); Pierce v. Visteon

Corp., 791 F.3d 782, 787 (7th Cir. 2015); Brytus v.

Spang & Co., 203 F.3d 238, 242-47 (3d Cir. 2000).

But if they settle the claims, the Second Circuit

now holds, they can expect much more from the

common-fund settlement. In this case, the district

court awarded a fee giving the “multiplier” of 1.39

times their lodestar—an enhancement of nearly 40%

above the unenhanced lodestar amount that Perdue

holds is “a reasonable attorney’s fee.” The district

court aptly observed, moreover, that this was a

relatively modest enhancement, compared to most

common-fund fee awards these days, favorably citing

decisions stating that “[l]odestar multipliers of over 4

are routinely awarded.”5

The Third Circuit has said “that, in common fund

cases ... ‘[m]ultiples ranging from one to four’ are the

norm.” S.S. Body Armor I., Inc. v. Carter Ledyard &

Milburn LLP, 927 F.3d 763, 774 (3d Cir. 2019)

(citation omitted). In Wal-Mart Stores, Inc. v. Visa

USA, Inc., 396 F.3d 96, 1123 (2d Cir. 2005), for

example, the Second Circuit blithely sustained a

common-fund attorney’s fee award, explaining that

the attorney’s “lodestar yields a multiplier of 3.5,

which has been deemed reasonable under analogous

circumstances.” In Vizcaino v. Microsoft Corp., 290

F.3d 1043, 1051 (9th Cir. 2002), the Ninth Circuit

Pet.App. 66a (quoting In re Telik, Inc. Sec. Litig., 576

F.Supp. 2d 570, 590 (S.D.N.Y. 2008)). As the district court put

it:

There is no question that Lead Counsel's lodestar

multiplier of 1.39 is at the lower range of comparable

awards in common fund cases. See Sinotech Energy Ltd.,

2013 WL 11310686, at *8 [(S.D.N.Y. Sept. 4, 2013)]

(collecting examples of courts awarding lodestar

multipliers of “between four and five”); In re Telik, Inc. Sec.

Litig., 576 F. Supp. 2d 570, 590 (S.D.N.Y. 2008)

(“[L]odestar multiples of over 4 are routinely awarded.”);

Maley v. Del Global Techs. Corp., 186 F. Supp. 2d 358, 369

(S.D.N.Y. 2002) (noting that multiplier of 4.65 was “well

within the range awarded by courts in this Circuit and

courts throughout the country”); see also Wal-Mart Stores,

Inc. [v. Visa U.S.A., Inc.], 396 F.3d [96] at 123 [(2d Cir.

2005)] (noting that, although in a megafund case, the

lodestar multiplier of 3.5 “ha[d] been deemed reasonable

under analogous circumstances”); Pl. Mem. at 9-10 & n.8

(collecting numerous cases).

Pet.App. 66a.

affirmed a common-fund fee award “which resulted in

a multiplier of 3.65” where the district court had

“found this number reasonable by considering the

factors in Kerr v. Screen Extras Guild, Inc., 526 F.2d

67, 69–70 (9th Cir.1975)”—which is to say, the socalled “Johnson factors” from in Johnson v. Georgia

Highway Express, Inc., 488 F.2d 714, 717–719 (5th

Cir. 1974), that Kerr adopted. Following Vizcaino the

Ninth Circuit sustained a multiplier of 6.85 in Steiner

v. American Broadcasting Co., 248 Fed. App’x 780,

783 (9th Cir. 2007), as “well within the range of

multipliers that courts have allowed.”

Just the other day the Eighth Circuit affirmed use

of the Johnson factors to award 28% of a common

fund as attorney’s fees, holding that “while the 5.3

lodestar multiplier is high, it does not exceed the

bounds of reasonableness.” Rawa v. Monsanto Co.,

___F3d___, ___, 2019 WL 3916537, at *5 (8th Cir.

Aug. 20, 2019)). It failed to note that this Court had

expressly repudiated the Johnson factors in Perdue,

because they give “‘very little actual guidance to

district courts,’” since “‘[s]etting attorney’s fees by

reference to a series of sometimes subjective factors

placed unlimited discretion in trial judges and

produced disparate results.’” Perdue, 559 U.S. at 563

(quoting Pennsylvania v. Delaware Valley Citizens

Council for Clean Air, 478 U.S. 546, 562 (1986)

(Delaware Valley I)); accord Murphy v. Smith, 138

S.Ct. 784, 789-90 (2018) (again disparaging the

Johnson factors).

Yet the lower courts continue to apply the Johnson

factors to common-fund fee awards, as if they

remained good law. In Muransky v. Godiva

Chocolatier, 922 F.3d 1175, 1195 & n.8 (11th Cir.

2019), for example, the Eleventh Circuit “recognize[d]

that the Supreme Court criticized the Johnson factors

in Perdue, 559 U.S. at 550-51,” yet it affirmed a

331/3% common-fund fee award based on the Johnson

factors on the ground that “Perdue arose in a different

context (fee-shifting statutes) and we are bound to

apply our precedent in Camden I and Johnson to this

common fund”). See also Union Asset Mgt. Holding

A.G. v. Dell, Inc., 669 F.3d 632, 642-43 & nn.25-31

(5th Cir. 2012) (applying the Johnson factors to a

common-fund fee award).

This Court’s attention is needed to bring uniformity

to the award of common-fund attorney’s fees.

II.

This

Court’s

Common-Fund

and

Equitable-Fund Precedents, Like its

Statutory Fee-Shifting Decisions, Limit

Attorney’s Fees to what is Reasonably

Necessary to Compensate the Lawyers

The Second Circuit rested its decision on an “acute

difference” between attorney’s fees under the

common-fund doctrine, and attorney’s fees under the

common-fund doctrine. Pet.App. 4a. “While in both

instances an attorney is entitled to a recovery that is

ultimately financed by the opposing party,” the

Second Circuit reasoned, “the Supreme Court has

placed greater restrictions on attorney’s fees

recovered from statutory fee-shifting provisions than

on fees recovered from common funds.” Pet.App. 7a.

Yet this Court’s common-fund decisions exhibit a

concern for beneficiaries of the common fund that is

at least as great as any solicitude it has shown to

defendants liable for the opposing party’s attorney’s

fees under a fee-shifting statute. It has never

authorized common-fund fee awards greater than the

fee-shifting decisions’ goal of “‘a fee that is sufficient

to induce a capable attorney to undertake the

representation of a meritorious ... case.’” Pet.App. 7a

(quoting Perdue, 559 U.S. at 552).

“Since the decisions in Trustees v. Greenough, 105

U.S. 527 (1882), and Central Railroad & Banking Co.

v. Pettus, 113 U.S. 116 (1885), this Court has

recognized consistently that a litigant or a lawyer

who recovers a common fund for the benefit of

persons other than himself or his client is entitled to

a reasonable attorney’s fee from the fund as a whole.”6

Warning that in some cases “these allowances have

been excessive, and perhaps illegal,” and that “we

would be very far from expressing our approval of

such large allowances to ... counsel as have sometimes

been made, and which have justly excited severe

criticism,” this Court nonetheless held in Greenough

that allowances for the payment of attorney’s fees

from a common fund, “if made with moderation and a

jealous regard to the rights of those who are

interested in the fund, are not only admissible, but

agreeable to the principles of equity and justice.”

Greenough, 105 U.S. at 536-37.7 The Court approved

reimbursement of the reasonable attorney’s fees that

Boeing Co. v. Van Gemert, 444 U.S. 472, 478 (1980)

(emphasis added); see U.S. Airways, Inc. v. McCutchen, 569

U.S. 88, 96 (2013) (quoting same); see generally John P.

Dawson, Lawyers and Involuntary Clients: Attorney Fees

From Funds, 87 Harv. L. Rev. 1597 (1974).

7 Although the opinions below (and Westlaw) erroneously give

1881 as Greenough’s year of decision, this Court’s records

show that the oral arguments took place on March 15, 1882,

and that this Court issued its decision on May 8, 1882. See

Anne Ashmore, Dates of Supreme Court Decisions and

Arguments: United States Reports Volumes 2-107 (17911882), at 162 (Washington, D.C.: Library of the Supreme

Court of the United States, August 2006), available online at

https://www.supremecourt.gov/opinions/datesofdecisions.pdf).

the named plaintiff, Francis Vose, had actually

incurred and paid over years of litigation—with no

special enhancements or multipliers of any kind.8

Moderation and restraint remained the rule in this

Court’s subsequent common-fund and equitable-fund

decisions. Holding in Pettus that lawyers whose

efforts had produced a common fund may receive

“such reasonable attorney’s fees as were fairly earned

in effecting the result,” Pettus, 113 U.S. at 123, and

are “entitled to reasonable compensation for their

professional services, id. at 127, this Court ruled that

“the sum allowed,” coming to ten percent of the fund,

“was too great,” and cut it to five percent. Id. at 128.

In United States v. Equitable Trust Co., 283 U.S.

738 (1931), moreover, while noting that a fund “may

be charged with the costs and expenses, including

reasonable attorney’s fees, incurred in that behalf, id.

at 744, this Court held that because the beneficiary

“had no voice in selecting the attorneys and could

have none in fixing their fees,” justice “required that

special care be taken to confine the fees to what was

reasonable.” Id. at 746. It cut the $100,000 approved

by the Second Circuit in half—taking it down to

roughly 8% of the fund.9 It appears, moreover, that

8 See Greenough, 105 U.S. at 529-31; see also Transcript of

Record, Trustees v. Greenough, No. 601, at 711-24 (original),

228-32 (print) (itemizing expenses, lawyer by lawyer) (1881).

9 The Second Circuit had rejected the district court’s notion

that counsel was entitled to one third of the fund and cut the

attorney’s fee award in half, to just $100,000, warning that

“[t]he allowance is a payment for legal services, not a

speculative interest in a lawsuit.” Barnett v. Equitable Trust

Co., 34 F.2d 916, 919 (2d Cir. 1929) (Learned Hand). The

attorneys told this Court that “from a percentage standpoint,

the allowance of $100,000 is but slightly over fifteen per cent.,

attorney’s fees of ten percent or less were long the

norm in common-fund cases.10

The Court has never held that counsel seeking a

common-fund award are entitled to a fee that is more

than “‘sufficient to induce a capable attorney to

undertake the representation of a meritorious ...

case.’” Pet.App. 7a (quoting Perdue, 559 U.S. at 552).

even upon the Circuit Court of Appeals basis of computing

the amount involved,” and that “never yet have counsel been

cut down to such a low percentage in any contested case

taken upon a contingent basis.” Brief for Respondents to

Whom Allowances Were Made, United States v. Equitable

Trust, 283 U.S. 738, [Oct. Term 1929 No. 530], at 55-56 (filed

April 16, 1930). But this Court found “the allowance of

$100,000 unreasonably high, and that to bring it within the

standard of reasonableness it should be reduced to $50,000,”

or about 8% of the fund. Equitable Trust, 283 U.S. at 746.

10 See, e.g., Pettus, 113 U.S. at 128 (slashing 10% award to

5%: “It remains only to consider whether the sum allowed

appellees was too great. We think it was. The decree gave

them an amount equal to ten per cent. upon the aggregate

principal and interest of the bonds and coupons filed in the

cause .... One-half the sum allowed was, under all the

circumstances, sufficient.”); Harrison v. Perea, 168 U.S. 311,

325 (1897) (reduction of a $5,000 fee award (or about 14% of

an equitable fund) to just 10% of the fund was “within the

judicial discretion of the court”); Harris v. Chicago Great W.

Ry., 197 F.2d 829, 835-36 (7th Cir. 1952) (reducing fee of

$500,000 on a $3.5 million fund recovered to $350,000 or 10%

of the fund); Illinois Bell Tel. Co. v. Slattery, 102 F.2d 58, 61

(7th Cir. 1939) (7½% of a $19 million fund); Confederated

Bands of Ute Indians v. United States, 120 Ct.Cl. 609, 682

(1951) (8¾% of $32 million fund); Farmers & Merchants Nat’l

Bank v. Peterson, 5 Cal. 2d 601, 607, 55 P.2d 867, 870 (Cal.

1936) (in a case that produced a $23,714.70 common fund,

approving an award of “5 per cent of the moneys received and

recovered herein as an attorney’s fee”).

The Second Circuit has in other contexts had no

difficulty recognizing “that a reasonable, paying client

wishes to spend the minimum necessary to litigate

the case effectively.” Arbor Hill Concerned Citizens

Neighborhood Ass’n v. County of Albany, 522 F.3d

182, 190 (2d Cir. 2008); see, e.g., McDaniel v. County

of Schenectady, 595 F.3d 411, 415 (2d Cir. 2010).

“Indeed, by focusing on the hourly rate at which a

client who wished to pay no more than necessary

would be willing to compensate his attorney, the

district court can enforce market discipline,

approximating the negotiation that might ensue were

the client actually required to pay the attorney's fees.”

Arbor, 522 F.3d at 192.

III.

This Court Has Made Clear that Costs

Statutes Do Not Limit Common-Fund Fee

Awards Precisely Because They Do Not

Purport to Define a Reasonable Attorney’s

Fee

The Second Circuit thought its holding warranted

by this Court’s decisions indicating that the commonfund doctrine is not subject to the limitation on fees

as taxable costs imposed by the Act of Feb. 26, 1853,

c. 80, 10 Stat. 161, which provided that fees to be

included in taxable costs should be limited to twenty

dollars in cases that go to trial, and in cases at law,

where judgment is rendered without a jury, ten

dollars, and five dollars where a cause is

discontinued.”11 But the limitations on attorney’s fees

11 The 1853 statute provided in relevant part:

In lieu of the compensation now allowed by law to

attorneys . . . the follow- ing and no other compensation

shall be taxed and allowed...

as taxable costs codified, today at 28 U.S.C. §1923(a),

do not affect common-fund fee awards because they

disclaim addressing the question of what is a

“reasonable attorney’s fee.”12

Fees of Attorneys, Solicitors, and Proctors. In a

trial before a jury, in civil and criminal causes, or

before referees, or on a final hearing in equity or

admiralty, a docket fee of twenty dollars: Provided,

That in cases in admiralty and maritime

jurisdiction, where the libellant shall recover less

than fifty dollars, the docket fee of his proctor shall

be but ten dollars.

In cases at law, where judgment is rendered

without a jury, ten dollars, and five dollars where

a cause is discontinued.

For scire facias and other proceedings on

recognizances, five dollars. For each deposition

taken and admitted as evidence in the cause, two

dollars and fifty cents.

A compensation of five dollars shall be allowed

for the services rendered in cases removed from a

district to a circuit court by writ of error or appeal

....

Act of Feb. 26, 1853, ch. 80, 10 Stat. 161; see Alyeska, 421

U.S. at 252-53 & n. 125 (quoting same).

12 See 28 U.S.C. §1923(a) (“(a) Attorney’s and proctor’s docket

fees in courts of the United States may be taxed as costs as

follows: $20 on trial or final hearing (including a default

judgment whether entered by the court or by the clerk) in

civil, criminal, or admiralty cases, except that in cases of

admiralty and maritime jurisdiction where the libellant

recovers less than $50 the proctor’s docket fee shall be $10;

$20 in admiralty appeals involving not over $1,000; $50 in

admiralty appeals involving not over $5,000; $100 in

admiralty appeals involving more than $5,000; $5 on

discontinuance of a civil action; $5 on motion for judgment

The opinion below states:

In Alyeska Pipeline Service Co. v. Wilderness

Society, the Court identified a “consistently

followed” rule that fee-shifting statutes do “not

interfer[e] with the historic power of equity to

permit . . . a party preserving or recovering a fund

for the benefit of others in addition to himself, to

recover his costs, including his attorneys’ fees, from

the fund . . . itself or directly from the other parties

enjoying the benefit.” 421 U.S. at 257. The Supreme

Court therefore suggested that, even when

statutory fees and the common-fund doctrine

collide, the common-fund doctrine operates

autonomously from fee-shifting principles.

Pet. App. 9a.

Trouble is, the statutes governing attorney’s fees as

costs disclaim addressing the question of what is a

reasonable attorney’s fee. Alyeska explains that the

act of Feb. 26, 1853, 10 Stat. 161, itself warned that it

did not purport to define what is a reasonable

attorney’s fee: “‘But this act shall not be construed to

prohibit attorneys, solicitors, and proctors from

charging to and receiving from their clients ... such

reasonable compensation for their services, in

addition to the taxable costs, as may be in accordance

with the general usage in their respective States, or

[as] may be agreed upon between the parties.’”

Alyeska, 421 U.S. at 253 (quoting Act of Feb. 26, 1853,

10 Stat. 161) (emphasis added); see also Alyeska, 421

U.S. at 257 n.30 (quoting Greenough, 105 U.S. at 53536) (emphasis added).

and other proceedings on recognizances; $2.50 for each

deposition admitted in evidence.”).

This Court had made the same point in Greenough:

“Of course, it is well understood that costs as between

solicitor and client include all reasonable expenses

and counsel fees, and are not like costs as between

party and party, confined to the taxed costs allowed

by the fee-bill.” Greenough, 105 U.S. at 533. “The feebill itself expressly provides that it shall not be

construed to prohibit attorneys, solicitors, and

proctors from charging to and receiving from their

clients (other than the government) such reasonable

compensation for their services, in addition to the

taxable costs, as may be in accordance with general

usage in their respective States, or may be agreed

upon between the parties.” Greenough, 105 U.S. at

535-36 (quoting Act of Feb. 26, 1853, c. 80, *536 10

Stat. 161; Rev. Stat., sect. 823) (emphasis added).

In short, the taxable-costs statutes clearly do not

purport to define a reasonable attorney’s fee. See id.

This Court’s decisions interpreting statutory

provisions authorizing awards of “a reasonable

attorney’s fee,” on the other hand clearly do define a

“reasonable attorney’s fee” as one that is “sufficient to

induce a capable attorney to undertake the

representation of a meritorious ... case,” holding that

an attorney’s unenhanced lodestar is presumptively

sufficient. Perdue, 559 U.S. at 552.

IV.

The Federal Securities Laws Provide for a

Regime of Statutory Fee Shifting Clearly

Governed by the Court’ Decisions

Defining “A Reasonable Attorney’s Fee”

Having held that “regardless of whether a case is

brought pursuant to a statute with a fee-shifting

provision,” district courts are free to award fees far

greater than those authorized by this Court’s feeshifting jurisprudence, the Second Circuit chose to

“offer no opinion on whether the statutes pursuant to

which the underling case arose contain applicable feeshifting provisions.” Pet.App. 6a.

Should this Court choose to reach the issue,

though, the securities laws’ provisions clearly do come

within this Court’s holdings concerning “a reasonable

attorney’s fee.” Noting that many federal statutes

authorize federal courts to award “reasonable

attorney’s fees,” this Court held in City of Burlington

v. Dague, 505 U.S. 557, 562 (1992), that “our case law

construing what is a ‘reasonable’ fee applies

uniformly to all of them.” Id. (citing International

Federation of Flight Attendants v. Zipes, 491 U.S. 754,

758 n.2 (1989)).

The 1933 Act claims settled in this case clearly are

governed by Securities Act of 1933 §11(e), 15 U.S.C.

§77k(e), which authorizes courts to award “reasonable

attorney’s fees” if a suit or a defense is found to be

“without merit.”13 The district court concluded that

13 Section 11(e) provides:

In any suit under this or any other section of this

subchapter the court may, in its discretion, require an

undertaking for the payment of the costs of such suit,

including reasonable attorney’s fees, and if judgment

shall be rendered against a party litigant, upon the

motion of the other party litigant, such costs may be

assessed in favor of such party litigant (whether or not

such undertaking has been required) if the court

believes the suit or the defense to have been without

merit, in an amount sufficient to reimburse him for the

reasonable expenses incurred by him, in connection with

such suit, such costs to be taxed in the manner usually

provided for taxing of costs in the court in which the suit

was heard.

15 U.S.C. §77k(e) (emphasis added); Pet.App. 94a-95a.

fees are available “only when a defense ‘borders on

the frivolous or is brought in bad faith.’” Pet.App. 60a

(quoting Western Federal Corp. v. Erickson, 739 F.2d

1439, 1444 (9th Cir. 1984)). But that is not what the

statute says. In Octane Fitness LLC v. ICON Health

and Fitness, Inc., 572 U.S. 545, 553 (2014), this Court

held that “analysis begins and ends with the text” of a

fee shifting provision, and that a requirement of

frivolousness or bad faith cannot be imposed by the

courts when it does not appear in the statutory text.

The 1934 Act’s express causes of action, remedying

fraudulent market manipulation in §9, and

misleading statements filed with the S.E.C. in §18,

also include fee-shifting provisions, each of them

stating:

In any such suit the court may, in its

discretion, require an undertaking for the

payment of the costs of such suit, and assess

reasonable costs, including reasonable attorneys’

fees, against either party litigant.

15 U.S.C. §§78i(f), 78r(a).

The 1934 Act claims in this case are brought under

§10(b), 15 U.S.C. §78j(b). Although 1934 Act §10(b)

contains no express private cause of action, this Court

has long recognized an implied a private right to sue,

see Herman & MacLean v. Huddleston, 459 U.S. 375,

380 & n.10 (1983), directing lower courts to look to

the federal securities laws’ express rights of action—

1934 Act §§9 and 18 in particular—to fill in the

details, such as the statute of limitations and the

right to contribution among joint tortfeasors. See

Lampf, Pleva, Lipkind, Prupis & Petigrew v.

Gilbertson, 501 U.S. 350, 358-64 & n.9 (1991)

(adopting limitations period from 1934 Act §9);

Musick, Peeler & Garret v. Employers Ins. Of Wausau,

508 U.S. 286, 294-97 (1993) (adopting contribution

among jointly liable tortfeasors from 1934 Act §§9,

18).

In Lampf this Court held that 1934 Act §9(e)—now

§9(f)—would provide the limitations period for §10(b)

claims. Lampf, 501 U.S. at 358-64 & n.9. In Musick,

Peeler, moreover, this Court noted that “two sections

of the 1934 Act, §§9 and 18 ... are close in structure,

purpose, and intent to the 10b-6 action” under §10(b).

Musick, Peeler, 508 U.S. at 295. Noting that these

sections “contain nearly identical express provisions

for a right to contribution,” the Court held that

“consistency requires us to adopt a like contribution

rule for the right of action existing under Rule 10b-5.”

Musick, Peeler, 508 U.S. at 297. As sections 9 and 18

similarly contain identical provisions providing that

“the court may, in its discretion, require an

undertaking for the payment of the costs of such suit,

and assess reasonable costs, including reasonable

attorneys’ fees, against either party litigant,” 15

U.S.C. §§78i(f), 78r(a) (emphasis added), consistency

would require applying the fee-shifting provisions of

section 9 and 18 to §10(b) actions.

Congress has since specified in 1934 Act §21D(a)(8),

moreover, that district courts may shift fees in any

1934 Act case that is certified as a class action: “In

any private action arising under this chapter that is

certified as a class action ... the court may require an

undertaking ... for the payment of fees and expenses

that may be awarded under this subsection.” 15

U.S.C. §78u-4(a)(8). Pet.App. 101a. The provision’s

legislative history explains that “Congress long ago

authorized similar undertakings in the express

private right of action in Section 11 of the 1933 Act

and in Sections 9 and 18 of the 1934 Act.” H.R. Conf.

Rep. No. 104-369, at 40 (1995). With §21D(a)(8),

Congress authorized fee shifting in any 1934 Act case

that is certified as a class action – as this case was.

The district court conflated subsection (a)(8) of 21D,

authorizing the award of fees “under this subsection”

in any case that is certified as a class action, and

subsection (c), requiring mandatory Rule 11 findings

at the end of every private 1934 Act case, with fee

shifting if a Rule 11 violation is found. Compare 15

U.S.C. §78u-4(a)(8) (fee shifting in certified class

actions) with §78u-4(c) (mandatory Rule 11 findings).

But subsection (a)(8) is an independent provision,

stating that fees “may be awarded under this

subsection.” 15 U.S.C. §78u-4(a)(8). Subsection (c),

dealing with mandatory Rule 11 findings in every

private action, is a different subsection, with its own

fee-shifting provisions. “‘Congress often drafts

statutes

with

hierarchical

schemes—section,

subsection, paragraph, and on down the line.’” Cyan,

Inc. v. Beaver County Employees Ret. Fund, 138 S.Ct.

1061, 1070 (quoting NLRB v. SW General, Inc., 137

S.Ct. 929, 938-39 (2017)). And “‘[w]hen Congress

want[s] to refer only to a particular subsection or

paragraph, it sa[ys] so.’” Id. (quoting SW General, 137

S.Ct. at 939) (Cyan’s brackets). If Congress had

intended §21D(a)(8)’s provision authorizing fee

awards “under this subsection” to refer instead to fee

awards under a different subsection, such as

subsection (c), it would have said so. It did not.

There is, in any event, no basis for concluding that

these fee shifting provisions do not govern the federal

securities claims asserted in this certified class

action, and no basis for holding that they are

somehow exempt from this Court’s “case law

construing what is a ‘reasonable’ fee,” which of course

“applies uniformly to all of them.” Dague, 505 U.S. at

562.

CONCLUSION

For all the foregoing reasons, the petition for a writ

of certiorari should be granted.

DATED: August 21, 2019

Respectfully submitted,

LAW OFFICE OF

ERIC ALAN ISAACSON

(Counsel of Record)

ericalanisaacson@icloud.com

6580 Avenida Mirola

La Jolla, CA 92037-6231

Telephone: (858) 263-9581

Counsel for Petitioner

Isaacson/Weaver Family Trust

APPENDIX A

Decision of the United States Court of Appeals

for the Second Circuit

17-2662-cv

Fresno Cty. Emps.’ Ret. Ass’n v. Isaacson/Weaver

Family Tr.

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

____________________

August Term, 2018

(Argued: November 15, 2018 Decided: May 23, 2019)

Docket No. 17-2662

____________________

FRESNO COUNTY EMPLOYEES’ RETIREMENT

ASSOCIATION,

Plaintiff-Appellee,

ISAACSON/WEAVER FAMILY TRUST,

Objector-Appellant.14

____________________

Before: JACOBS, POOLER, and WESLEY, Circuit

Judges.

The Clerk of Court is directed to amend the caption as

above.

The Isaacson/Weaver Family Trust appeals from

the July 26, 2017, order of the United States District

Court for the Southern District of New York (Alison J.

Nathan, J.) granting Bernstein Litowitz Berger &

Grossmann LLP’s request for a percentage fee

awarded from the common settlement fund. The fee

award was compensation for the firm’s representation

of a class of plaintiffs that settled federal securities

law claims against BioScrip, Inc. The Isaacson/

Weaver Family Trust, a member of the class, objected

to the fee award in the district court, arguing that the

class’s claims were brought pursuant to statutes

containing fee-shifting provisions and therefore class

counsel’s fee award was presumptively limited to the

unenhanced lodestar (counsel’s hourly rate multiplied

by the hours expended on the case). The district court

found this objection unavailing and ruled that,

because the parties’ settlement agreement provided

for class counsel to be compensated from a common

settlement fund, class counsel was entitled to fees

under the equitable common-fund doctrine rather

than pursuant to a statutory fee-shifting provision.

Under the common-fund doctrine, the district court

held that a percentage fee award was appropriate.

On appeal, we conclude that, regardless of whether

the claims settled here were initiated under feeshifting statutes, the common-fund doctrine properly

controls the district court’s allocation of attorneys’

fees from a common settlement fund. This is because

class plaintiffs have received the benefit of counsel’s

representation and assumption of the risk that the

lawsuit will not render a recovery, and thus the class

may be fairly charged for counsel’s assumption of

contingent risk. The district court was therefore

entitled to exercise its discretion to award either a

percentage-of-the-fund fee or a lodestar fee to class

counsel. We offer no opinion as to whether the claims

settled here were initiated under fee-shifting statutes.

Accordingly, we AFFIRM the order of the district

court.

Affirmed.

____________________

ERIC ALAN ISAACSON, La Jolla, CA,

for Objector-Appellant.

HANNAH G. ROSS, Bernstein Litowitz

Berger

Grossmann

LLP

(Jai

Chandrasekhar, on the brief), New York,

NY, for Plaintiff-Appellee.

POOLER, Circuit Judge:

The objection of the Isaacson/Weaver Family Trust

(the “Objector”) to Bernstein Litowitz Berger &

Grossmann LLP’s fee award raises a novel issue of

the proper principles for allocating fees awarded from

a common-fund settlement. The Objector argues that,

whenever an action is initiated under a statute with a

fee-shifting provision, an attorney’s fee is

presumptively limited to the unenhanced lodestar fee,

even if the action is settled by the creation of a

common fund. Appellee argues that the contrary is

true, claiming that, whenever an action is settled

with the creation of a common fund, equitable

principles permit the district court to award a fee that

can be calculated using either the lodestar-fee method

or a percentage-of-the-fund method. As Second

Circuit case law has long implied, we hold that, even

if a case is brought pursuant to a fee-shifting statute,

common-fund

principles

control

fee

awards

authorized from a common fund, and a common-fund

fee award may be calculated as the lodestar or as a

percentage of the common fund. In so holding, we

recognize the acute difference between assessing a fee

award against a defendant, who reaps no benefit from

an action brought against him, and requiring class

members to compensate counsel for representation

that enriches the class. We AFFIRM the wellreasoned order of the district court finding that

Bernstein Litowitz Berger & Grossmann LLP is

entitled to its requested fee and expense award.

BACKGROUND

This case is collateral litigation arising from the

June 16, 2016, settlement of a consolidated securities

class action brought by shareholders of BioScrip, Inc.

The district court appointed Fresno County

Employees’ Retirement Association as lead plaintiff

and Bernstein Litowitz Berger & Grossmann LLP

(“Lead Counsel”) as lead counsel for the action. The

class sought to recover for two allegedly material

misrepresentations that BioScrip, Inc. made and

brought an action under Sections 10(b) and 20(a) of

the Securities Exchange Act of 1934; Securities and

Exchange Commission Rule 10b-5; and Sections 11,

12(a)(2), and 15 of the Securities Act of 1933.

After the consolidated class-action complaint

largely survived a motion to dismiss and the case

entered discovery, the parties agreed to settle all of

the aforementioned claims. The settlement called for

the class-action defendants to pay $10,900,000 into a

common fund in exchange for the class releasing all

claims asserted against the defendants in the action.

The settlement also provided that “Lead Counsel will

apply to the Court for a collective award of attorneys’

fees to Plaintiffs’ Counsel to be paid solely from (and

out of) the Settlement Fund.” Stipulation &

Agreement of Settlement at 20, ¶19, Faig v. BioScrip,

Inc., No. 13-cv- 6922(AJN) (S.D.N.Y. Feb. 4, 2016),

ECF No. 104-5. Thereafter, Lead Counsel moved for

an award of attorneys’ fees of 25% of the settlement

fund, totaling $2,725,000 plus interest, and an

expense award of $133,565.28. Lead Counsel’s

requested fee award amounted to a 1.39 multiplier of

the lodestar fee.

The Isaacson/Weaver Family Trust filed an

objection to Lead Counsel’s requested award, arguing

that Lead Counsel’s award should be reduced to the

lodestar amount. No other class member objected to

the settlement agreement or the requested fee. The

district court subsequently held a settlement fairness

hearing where it heard argument on, among other

things, Lead Counsel’s fee request. In a thorough and

discerning opinion, the district court found that Lead

Counsel’s requested fee was reasonable and granted

the fee in full.

DISCUSSION

The parties primarily dispute the method by which

a reasonable fee should be calculated when class

counsel settles claims brought pursuant to statutes

with fee-shifting provisions by establishing a common

settlement fund. The Objector argues that, because

the parties created the common fund to resolve claims

based on statutes with fee-shifting provisions, the

Supreme Court’s fee-shifting jurisprudence applies,

and Lead Counsel is presumptively entitled to only

the unenhanced lodestar fee. Lead Counsel disagrees,

arguing that the settlement that created the common

fund resolved claims based on statutes that do not

have

applicable

fee-shifting

provisions,

and

regardless, the common-fund doctrine governs a

district court’s award of attorneys’ fees when counsel

has secured a settlement fund for the benefit of the

class. We make clear today what has long been

implicit in this Circuit’s jurisprudence: regardless of

whether a case is brought pursuant to a statute with

a fee-shifting provision, if the parties settle the case

by creating a common fund, common-fund principles

control class counsel’s fee recovery. So concluding, we

offer no opinion on whether the statutes pursuant to

which the underlying case arose contain applicable

fee- shifting provisions.

I. Standard of Review

“The Second Circuit reviews a district court’s

decision to grant or deny an award of attorneys’ fees

for abuse of discretion, reviewing de novo any rulings

of law.” Flanagan, Lieberman, Hoffman & Swaim v.

Ohio Pub. Emps. Ret. Sys., 814 F.3d 652, 656 (2d Cir.

2016). Because the Objector has challenged the fee

award based on the district court’s ruling of law that

Lead Counsel was entitled to a common- fund fee

award, our review is de novo.

II. The American Rule and Its Exceptions

In the American system of justice, “the prevailing

litigant is ordinarily not entitled to collect a

reasonable attorneys’ fee from the loser.” Alyeska

Pipeline Serv. Co. v. Wilderness Soc’y, 421 U.S. 240,

247 (1975). There are two well-known exceptions to

this “American Rule”: (1) where Congress has

specifically legislated that the prevailing party may

recover fees from the losing party, see Perdue v.

Kenny A. ex rel. Winn, 559 U.S. 542, 550 & n.3 (2010),

and (2) where “a litigant or a lawyer ... recovers a

common fund for the benefit of persons other than

himself or his client,” Boeing Co. v. Van Gemert, 444

U.S. 472, 478 (1980). While in both instances an

attorney is entitled to a recovery that is ultimately

financed by the opposing party, the Supreme Court

has placed greater restrictions on attorneys’ fees

recovered from statutory fee-shifting provisions than

on fees recovered from common funds.

When a statute’s fee-shifting provision authorizes a

reasonable attorneys’ fee, the Supreme Court has

held that “the lodestar method yields a fee that is

presumptively sufficient.”15 Perdue, 559 U.S. at 552.

Fee-shifting provisions typically encourage counsel to

represent plaintiffs in actions where “Congress has

opted to rely heavily on private enforcement to

implement public policy.” Alyeska Pipeline Serv. Co.,

421 U.S. at 263. Where a litigant acts as a private

attorney general, the goal of fee shifting is to provide

“a fee that is sufficient to induce a capable attorney to

undertake the representation of a meritorious . . .

case.” Perdue, 559 U.S. at 552. The defendant

effectively finances the private enforcement action

against it as a component of its liability. See Alyeska

Pipeline Serv. Co., 421 U.S. at 253-54 (quoting feeshifting provisions that refer to taxing the opposing

party for fees “incident to the judgment” (internal

quotation marks omitted)).

Notably, an unenhanced lodestar fee does not

account for the contingent risk that a lawyer may

assume in taking on a case. See City of Burlington v.

Dague, 505 U.S. 557, 562-63 (1992); Pennsylvania v.

Del. Valley Citizens’ Council for Clean Air (Del. Valley

II), 483 U.S. 711, 724-25 (1987). This makes

15 The lodestar method calculates a given attorney’s fee by

multiplying an attorney’s reasonable hourly rate by the

number of hours that the attorney spent on the case. Perdue,

559 U.S. at 546.

particular sense where the defendant shoulders the

burden of fees because “[a]n attorney operating on a

contingency-fee basis pools the risks presented by his

various cases.” Dague, 505 U.S. at 565. Therefore,

“enhancing fees for risk of loss forces losing

defendants to compensate plaintiff’s lawyers for not

prevailing against defendants in other cases.” Del.

Valley II, 483 U.S. at 724-25. The defendant, however,

has no responsibility to compensate an attorney for

risk in the attorney’s other cases and would be

unfairly penalized if it were forced to subsidize an

attorney’s other ventures. Thus, where counsel

receives a fee award pursuant to a fee-shifting statute

authorizing a reasonable fee, we presume that the

unenhanced lodestar is a reasonable fee. Perdue, 559

U.S. at 552.

In contrast to fees awarded pursuant to fee-shifting

provisions, fees awarded pursuant to the commonfund doctrine do not extract a tax on the losing party

but instead confer a benefit on the victorious attorney

for her representation of her client and the class

members. See Boeing, 444 U.S. at 478. “The doctrine

rests on the perception that persons who obtain the

benefit of a lawsuit without contributing to its cost

are unjustly enriched at the successful litigant’s

expense.” Id. The common-fund doctrine is therefore

rooted in the courts’ “historic power of equity to

permit” a person who secures a fund for the benefit of

others to collect a fee directly from the fund. Alyeska

Pipeline Serv. Co., 421 U.S. at 257 (citing Trustees v.

Greenough, 105 U.S. 527, 531-33 (1881)). Under the

common-fund doctrine, a district court may select

“either the lodestar or percentage of the recovery

methods” to calculate fees. Goldberger v. Integrated

Res., Inc., 209 F.3d 43, 45 (2d Cir. 2000); see also

McDaniel v. County of Schenectady, 595 F.3d 411, 419

(2d Cir. 2010). A common-fund-percentage fee must

still be evaluated for reasonableness, see, e.g.,

McDaniel, 595 F.3d at 423, but may exceed the

lodestar—i.e., it may be less than, equal to, or greater

than the lodestar, see, e.g., Goldberger, 209 F.3d at 47.

Accordingly, the means by which an attorney

becomes entitled to a fee can affect the method used

to calculate what a reasonable fee is. Subject always

to the district court’s discretion, an attorney seeking a

fee after establishing statutory liability will

presumptively receive a fee equal to the unenhanced

lodestar, and an attorney seeking a fee after

establishing a common fund will receive a fee

calculated using either the lodestar method or a

percentage-of-the-fund method, which can yield a fee

that is less than, equal to, or greater than the

lodestar fee.

III. Fee-Shifting Statutes Do Not Circumscribe

the Common-Fund Doctrine

Fee-shifting principles and the common-fund

doctrine occupy separate realms. In Alyeska Pipeline

Service Co. v. Wilderness Society, the Court identified

a “consistently followed” rule that fee-shifting

statutes do “not interfer[e] with the historic power of

equity to permit . . . a party preserving or recovering

a fund for the benefit of others in addition to himself,

to recover his costs, including his attorneys’ fees, from

the fund . . . itself or directly from the other parties

enjoying the benefit.” 421 U.S. at 257. The Supreme

Court therefore suggested that, even when statutory

fees and the common-fund doctrine collide, the

common-fund doctrine operates autonomously from

fee-shifting principles.

Our Circuit has followed suit. In County of Suffolk

v. Long Island Lighting Co., this Court considered

10a

whether class counsel could be awarded fees from a

common fund despite the fact that counsel would be

entitled to statutory fees under the Racketeer

Influenced and Corrupt Organizations Act if it

prevailed on appeal. 907 F.2d 1295, 1326-27 (2d Cir.

1990). En route to deciding that class counsel was

entitled to fees for its significant work in bringing

about a settlement, we observed that “fee-shifting

statutes are generally not intended to circumscribe

the operation of the equitable fund doctrine.” Id. at

1327. An exception to this principle exists only if the

equitable-fund doctrine interferes with a fee-shifting

statute’s purpose “to encourage the prosecution of

certain favored actions by private parties,” in which

case the doctrine yields to the statute. Id. We

determined that, where a common fund results from

the commencement of a favored action, no such

interference exists, and class counsel is entitled to

fees under the common-fund doctrine notwithstanding a statutory fee-shifting provision. Id. at 1327-28.

In Goldberger v. Integrated Resources, Inc., we

again obliquely addressed the common-fund doctrine

vis-à-vis statutory fee-shifting principles. 209 F.3d 43.

There, we considered whether a securities classaction settlement—settling claims brought under

Rule 10b-5, id. at 45, one of the provisions at issue in

this case—could support an award of attorneys’ fees

based on a percentage-of-the-fund approach. Id. at 47.

We noted that both the lodestar and the percentageof-the-fund methods can yield a “reasonable

attorneys’ fee” from a common-fund settlement. Id. at

47-50; see also McDaniel, 595 F.3d at 419. The Court’s

analysis foreshadowed our decision today: in rejecting

counsel’s claim “that the district court erroneously

relied on the strictures against risk multipliers in

statutory fee-shifting cases” when it awarded a

11a

lodestar fee in a common-fund case, we noted that

“[c]ourts have held such strictures inapplicable to

cases like this, where the lawyers seek fees from a

common fund they won for plaintiffs.” Goldberger, 209

F.3d at 54 n.3.

IV.

Our Sister Circuits Have Articulated

Sound Rationale for Precluding the

Application of Fee-Shifting Principles to

Common-Fund Awards

Our sister circuits have persuasively supported

Goldberger’s unceremonious rejection of the

suggestion that statutory fee-shifting principles

curtail a district court’s discretion in common-fund

cases and have offered compelling reasons why a

common-fund fee may differ from a statutory fee.

The Ninth Circuit has held that “unless Congress

has forbidden the application of the common fund

doctrine in cases in which attorneys could potentially

recover fees under the type of fee-shifting statutes at

issue here, the courts retain their equitable power to

award common fund attorneys’ fees.” Staton v. Boeing

Co., 327 F.3d 938, 968 (9th Cir. 2003). The court

reasoned that in negotiating a settlement, “a

defendant is interested only in disposing of the total

claim asserted against it.” Id. at 964 (internal

quotation marks omitted). Therefore, “the allocation

between the class payment and the attorneys’ fees is

of little or no interest to the defense.” Id. (internal

quotation marks omitted); see also Goldberger, 209

F.3d at 52-53 (noting this principle in the context of

parties’ incentives to oppose a fee award).

The settling defendant’s focus is on its bottom line,

and once that bottom line has been inked, the

defendant’s interest in how class members and class

counsel spend the settlement money dwindles. This is

12a

in stark contrast to fees awarded pursuant to a feeshifting statute, where as part of its liability and in

addition to any monetary judgment, the defendant is

forced to pay for the costs of the statute’s enforcement

against it. Cf. Alyeska Pipeline Serv. Co., 421 U.S. at

247-54 (tracing the evolution of taxable costs against

a defendant as an incident of the defendant’s

liability). Therefore, where a statute shifts fees, we

consider a reasonable fee with the defendant’s

perspective in mind. See Del. Valley II, 483 U.S. at

724-25 (rejecting contingency enhancement of

lodestar fee after discussing the ramifications of such

an enhancement on defendants).

In contrast, where an attorney has settled a case

and created a common fund, we determine what a

reasonable fee is from the plaintiff’s perspective.

Critically, a reasonable fee from the plaintiff’s

perspective can account for contingency risk where

such risk exists,16 and a common-fund fee may

therefore exceed what would be a “reasonable fee” in

the fee-shifting context. The Seventh Circuit has

persuasively articulated why accounting for

contingency risk can be appropriate when the

plaintiff funds the fee but not when the defendant

funds the fee. Assessing a fee that accounts for

contingency risk against a defendant would require

the defendant to “subsidiz[e] plaintiffs’ attorneys for

unsuccessful lawsuits against other defendants.”

16 We note that it will not always be the case that an attorney

representing a class assumes compensable contingency risk.

A case may, for example, have such a high likelihood of being

meritorious that compensation for contingency risk is

unnecessary. See, e.g., Goldberger, 209 F.3d at 52 (noting that

there is not “a substantial contingency risk in every common

fund case” and cautioning against calculating contingency

risk into every percentage-fee award).

13a

Florin v. Nationsbank of Ga., N.A., 34 F.3d 560, 565

(7th Cir. 1994). But “[i]n a common fund case, ...

because compensation for risk is charged against the

plaintiff class, defendants would not be forced to

subsidize directly plaintiffs’ attorneys’ losing

endeavors.” Id. (emphasis added).

The plaintiff class is therefore appropriately

charged for contingency risk where such risk is

appreciable because the class has benefited from class

counsel’s decision to devote resources to the class’s

cause at the expense of taking other cases. That is,

because class counsel has decided to represent the

plaintiff class, class counsel’s ability to freely

represent other clients is limited by the risk she has

assumed that the class’s cause will be unsuccessful.

The class, having been enriched by counsel’s

acceptance of its cause at the expense of other clients’

causes, may be charged for counsel’s assumption of

risk on its behalf. Consistent with the reasoning and

holding of the Ninth Circuit in Staton, the Seventh

Circuit has therefore held that “common fund

principles properly control a case [that] is initiated

under a statute with a fee-shifting provision, but is

settled with the creation of a common fund.” Id. at

564; see also Staton, 327 F.3d at 968.

The Common-Fund Doctrine Does Not

Threaten to Misalign Counsel and Her

Client’s Incentives

In agreeing with the Seventh and Ninth Circuits,

we decline to yield to the Objector’s contention that

applying common-fund principles to fee recoveries

from cases initiated under fee-shifting statutes will

misalign attorneys’ incentives. The Objector argues

that allowing counsel to extract a percentage fee

under the common-fund doctrine encourages counsel

14a

to settle cases early—even when her client’s best

interests are served by prosecuting the claim to trial.

We recognize that both the lodestar methodology and

the common-fund methodology provide imperfect

solutions for aligning an attorney’s incentive to settle

with her client’s. McDaniel, 595 F.3d at 419

(“[N]either the lodestar nor the percentage-of-fund

approach to awarding attorneys’ fees in common fund

cases is without problems.”). We nonetheless do not

share in the Objector’s concern that the percentagefee approach will destroy class representation for two

primary reasons: first, a fee awarded under the

common-fund doctrine provides class counsel with the

incentive to maximize the settlement payout for the

class because a larger settlement yields a

proportionally larger fee; second, a district court is

required to review class settlements and class

counsel’s fees, providing an extra layer of security

that class counsel will fairly and adequately represent

the class.

As to the first reason, we have previously noted

that “the percentage method has the advantage of

aligning the interests of plaintiffs and their attorneys

more fully by allowing the latter to share in both the

upside and downside risk of litigation.” Id. Thus, once

the parties have agreed to settle, the percentage-ofthe-fund methodology serves as important motivation

for counsel to maximize the class’s recovery, and, a

fortiori, counsel’s fee.

This incentive structure is critically important

because, under the common-fund doctrine, class

counsel is not entitled to a common-fund fee or an

unenhanced lodestar fee by force of entering into a

settlement agreement on the class’s behalf. Rather,

the district court retains discretion to determine

which methodology it will use to calculate class

15a

counsel’s reasonable fee. Goldberger, 209 F.3d at 50

(“[W]e hold that both the lodestar and the percentage

of the fund methods are available to district judges in

calculating attorneys’ fees in common fund cases.”).

As such, class counsel cannot enter into a premature

settlement confident that it will receive a percentageof-the-fund fee that exceeds its lodestar fee. Since the

district court alone makes the decision of how class

counsel’s fee will be calculated, class counsel’s safest

bet for securing a large fee award is to prosecute the

action until the point at which settlement is the best

available option and thereafter maximize her client’s

returns.

As to the second reason that a percentage-fee

method is workable despite the Objector’s concerns,

we are comforted by the fact that a “court is to act as

a fiduciary who must serve as a guardian of the rights

of absent class members” in reviewing a class-action

settlement and a class fee award. Id. at 52 (internal

quotation marks omitted). The Federal Rules of Civil

Procedure require that “[t]he claims, issues, or

defenses of a certified class—or a class proposed to be

certified for purposes of settlement—may be settled,

voluntarily dismissed, or compromised only with the

court’s approval.” Fed.R.Civ.P. 23(e) (emphasis

added). Rule 23 requires the district court to hold a

hearing and consider a number of factors to ensure

that a proposed settlement “is fair, reasonable, and

adequate,” id. 23(e)(2), and the court must specifically

evaluate “the terms of any proposed award of

attorney’s fees,” id. 23(e)(2)(C)(iii). Thus, the district

court is required to review both the terms of the

settlement and any fee award encompassed in a

settlement agreement. This review provides a

backstop that prevents unscrupulous counsel from

quickly settling a class’s claims to cut a check.

16a

In addition to ex post facto review of fee awards,

some district courts have elected to exercise their

discretion to select and manage class counsel at the

outset of the litigation. See Gunter v. Ridgewood

Energy Corp., 223 F.3d 190, 201 n.6 (3d Cir. 2000)

(“[D]istrict courts can avoid many of [the]

complications associated with fee awards by setting

fee guidelines and ground rules early in the litigation

process.”). One example of such an ex ante approach

to selecting class counsel, popular in securities class

actions, is for the district court to request that

prospective class attorneys submit proposals

regarding their qualifications, predictions for

expected recovery, and their prospective fees. See In

re Synthroid Mktg. Litig., 264 F.3d 712, 720 (7th Cir.

2001). Thereafter, “[t]he judge in turn acts as an

agent for the class, selecting the firm that seems

likely to generate the highest recovery net of

attorneys’ fees.” Id.; see also Gunter, 223 F.3d at 201

n.6. Placing the district court at the helm of classcounsel selection allows the district court to actively

consider class counsel’s performance while the

litigation remains pending and is another means of

monitoring fee awards.

Further, if judicial review of class-action

settlements with a “searching assessment” of

counsel’s fee award, McDaniel, 595 F.3d at 419

(internal quotation marks omitted), were not solace

enough for the Objector, we have also counseled that

the district court should use the lodestar as a

“baseline” against which to cross-check a percentage

fee: “we encourage the practice of requiring

documentation of hours as a ‘cross check’ on the

reasonableness of the requested percentage,”

Goldberger, 209 F.3d at 50. Thereafter, “the

reasonableness of the claimed lodestar can be tested

17a

by the court’s familiarity with the case.” Id. Fee

requests that deviate wildly from the unenhanced

lodestar fee are unlikely to pass this cross-check, and

district courts are at liberty to reduce the requested

fee within their discretion.

We thus have confidence in the district court as

fiduciary of the class and ultimate decisionmaker on a

class-action settlement to substantially alleviate the

Objector’s concerns about class counsel’s incentives.

Having obtained such reassurance, we hold that,

where a class action results in a common-fund

settlement for the benefit of the class, the commonfund doctrine applies and permits a district court to

use its discretion to award class counsel either an

unenhanced lodestar fee or a fee calculated as a

percentage of the settlement fund. This principle

applies even when claims are initiated pursuant to a

statute with a fee-shifting provision. Since the parties

do not argue that the district court abused its

discretion in analyzing the propriety of the fee award

under the discretionary factors, we affirm the order of

the district court.

CONCLUSION

The class, including the Objector, has benefited

from Lead Counsel’s negotiation of a common

settlement fund. Because Lead Counsel’s fee is

extracted directly from the beneficiaries of its work,

Lead Counsel is entitled to compensation not only for

skillfully negotiating that settlement fund but for

bearing the risk that the suit would not generate any

recovery. Accordingly, even if the class’s claims were

initiated under fee-shifting statutes, common-fund

principles would govern, and the district court had

the discretion to award Lead Counsel a fee equaling

either the lodestar fee or a percentage of the fund.

18a

The district court did not abuse its discretion when it

determined that a percentage of the fund reasonably

compensated counsel. The district court’s order is

hereby AFFIRMED.

19a

APPENDIX B

Judgment of the U.S. Court of Appeals for the

Second Circuit

UNITED STATES COURT OF APPEALS

FOR THE

SECOND CIRCUIT

At a Stated Term of the United States Court of

Appeals for the Second Circuit, held at the Thurgood

Marshall United States Courthouse, 40 Foley Square,

in the City of New York, on the 23rd day of May, two

thousand and nineteen.

Before:

Dennis Jacobs,

Rosemary S. Pooler,

Richard C. Wesley,

Circuit Judges.

_______________________________

Fresno County Employees’

Retirement Association,

Plaintiff–Appellee,

JUDGMENT

Docket No.

17-2662

Isaacson/Weaver Family Trust,

Objector–Appellant.

_______________________________

The appeal in the above captioned case from an

order of the United States District Court for the

Southern District of New York was argued on the

20a

district court’s record and the parties’ briefs. Upon

consideration thereof,

IT IS HEREBY ORDERED, ADJUDGED and

DECREED that the order of the district court is

AFFIRMED.

For the Court:

Catherine O’Hagan Wolfe,

Clerk of Court

/s/ Catherine O’Hagan Wolfe

21a

APPENDIX C

Opinion of the District Court Awarding

Attorney’s Fees

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK

13-cv-6922

MEMORANDUM &

ORDER

_______________________________________

In re BioScrip, Inc. Securities Litigation |

_______________________________________|

ALISON J. NATHAN, District Judge:

On June 16, 2016, the Court issued orders

approving the plan of allocation of the net settlement

fund and the class action settlement. Dkt. Nos. 12324. The Court now addresses Lead Counsel’s

application for attorney’s fees. For the reasons that

follow, Counsel’s application is granted in its entirety.

I. Background

The above case is a securities class action brought

on behalf of all persons and entities who purchased or

acquired the publicly traded common stock of

BioScrip, Inc. (“BioScrip”) between November 9, 2012

and November 6, 2013. See Dkt. No. 68, at 1

(hereafter “Mar. 31, 2015 Order”). The consolidated

actions stem from allegations that BioScrip violated

the securities laws through two sets of allegedly

misleading statements: first, statements affirming

22a

BioScrip’s

compliance

with

relevant

laws

notwithstanding the Government’s investigation into

an alleged kickback scheme between BioScrip and

Novartis Pharmaceuticals Corp.; and second,

statements affirming the profitability of BioScrip’s

pharmacy benefit management operating segment,

notwithstanding the undisclosed loss of a significant

segment of that business. See generally Consolidated

Class Action Complaint (Dkt. No. 22) (hereafter the

“Complaint”). The Court assumes familiarity with the

Court’s Memorandum and Order of March 31, 2015,

granting in part and denying in part Defendants’

motions to dismiss, which describes in detail the

factual and legal contours of the case. See Mar. 31,

2015 Order.

On September 30, 2013, Plaintiff Timothy Faig

filed the first class action complaint in this case, Dkt.

No. 1, which was followed by the filing of a related

complaint on November 15, 2013, by the West Palm

Beach Police Pension Fund, 13-cv-8175, Dkt. No. 1.

On December 2, 2013, the Fresno County Employees’

Retirement Association (“Fresno” or “Lead Plaintiff”)

moved for appointment as lead plaintiff, as well as for

approval of its selection of lead counsel, the law firm

of Bernstein Litowitz Berger & Grossmann LLP

(“BLB&G” or “Lead Counsel”1). Dkt. No. 11. On

In its December 19, 2013 Order consolidating the actions in

this case and appointing Lead Plaintiff and Lead Counsel, the

Court appointed Fresno Lead Plaintiff and BLB&G Lead

Counsel. See Dkt. No. 17. In the Consolidated Class Action

Complaint, however, Fresno added an additional named

plaintiff, the West Palm Beach Police Pension Fund, which

was represented by Saxena White P.A. See Complaint at 1,

110. In its request for fees, Lead Counsel includes Saxena

White (and thus includes hours billed by Saxena White in the

lodestar calculation). See Memorandum of Law in Support of

23a

December 19, 2013, the Court consolidated the two

class action complaints, and appointed Fresno as

Lead Plaintiff and BLB&G as Lead Counsel. Dkt. No.

17.

Lead Counsel represents that, over the next few

months, it conducted an extensive factual and legal

investigation, pursuant to which counsel reviewed

numerous documents, conducted 72 interviews with

former employees of BioScrip and other relevant

individuals, researched relevant case-law, and

consulted with various experts. Ross Decl. ¶19. On

the basis of this investigation, on February 19, 2014,

Lead Counsel filed Plaintiffs’ Consolidated Class

Action Complaint, a 110-page document asserting

claims under both the Exchange Act of 1934,

15 U.S.C. §78a et seq., and the Securities Act of 1933,

15 U.S.C. §77a et seq. See Complaint. In particular,

Plaintiffs brought five claims against the Defendants:

a claim under Section 10(b) of the Exchange Act and

Rule 10b-5 promulgated pursuant to that section, a

Section 20(a) control person claim, a claim under

Section 11 of the Securities Act, a Section 12(a)(2)

claim under that act, and a Section 15 control person

liability claim. See Mar. 31, 2015 Order at 13. Two

sets of Defendants then moved to dismiss the

Complaint. See Dkt. Nos. 41, 45. On March 31, 2015,

the Court granted in part and denied in part both

motions. Mar. 31, 2015 Order. On June 5, 2015, the

Lead Counsel’s Motion for an Award of Attorney’s Fees and

Reimbursement of Litigation Expenses, Dkt. No. 110, at 25

(hereafter “Pl. Mem.”); Declaration of Hannah G. Ross, Dkt.

No. 111 ¶90 (hereafter “Ross Decl.”); Ross Decl., Ex. 5. In

referring to “Lead Counsel” then, the Court refers to both

BBL&G and Saxena White, and, in approving Lead Counsel’s

request, approves the fees requested as to both firms.

24a

Court denied the Defendants’ motion for partial

reconsideration. Dkt. No. 86. Thereafter, the parties

began the discovery process, which included

Defendants’ production of approximately 800,000

pages of documents. Ross Decl. ¶41.

In August of 2015, the parties agreed to seek a

settlement via mediation, and selected former U.S.

District Judge Layn Phillips as a mediator. Id. ¶42.

As part of the mediation process, both parties

submitted briefing, and appeared for a full-day

mediation session on September 25, 2015. Id. ¶46. At

the session, the parties debated numerous factual and

legal areas of dispute, and ultimately failed to reach

an agreement to settle the action. Id. After additional

negotiations, however, and after Judge Phillips

provided a recommended settlement amount, the

parties ultimately reached a resolution, which they

submitted to this Court for preliminary approval on

December 18, 2015. Dkt. No. 101. On February 11,

2016, the Court issued an order preliminarily

approving the settlement and providing for notice.

Dkt. No. 106.

In the settlement, BioScrip agreed to pay

$10,900,000 to settle the lawsuit in its entirety (on

behalf of all defendants). Ross Decl. ¶3; see also

Settlement ¶1(rr) (Dkt. No. 101-1); Dkt. No. 124

(Judgment Approving Class Action Settlement). The

settlement agreement also stipulated that Lead

Counsel would apply for attorney’s fees, as well as

costs and expenses, directly from the fund. See

Settlement ¶19. The settlement also specified that

Defendants would have no responsibility nor liability

for attorney’s fees beyond the settlement amount. Id.

¶23.

25a

On May 9, 2016, Lead Plaintiff moved to approve

the class action settlement and plan of allocation,

Dkt. No. 107, and Lead Counsel moved for an award

of attorney’s fees, costs, and expenses, Dkt. No. 109.

In particular, Lead Counsel requested attorney's fees

in the amount of 25% of the settlement fund, i.e.

$2,725,000, plus interest earned at the same rate as

the Settlement Fund, reimbursement for $133,565.28

in litigation expenses incurred, and reimbursement to

Lead Plaintiff for $1,378.61 in costs. See Pl. Mem. at

1; Ross Decl. ¶2. Lead Counsel argued that, relying on

the percentage method to calculate a reasonable

attorney’s fee, the request should be approved. See id.

at 3-4 (citing Goldberger v. Integrated Res., Inc., 209

F.3d 43, 47 (2d Cir. 2000) (contrasting the percentage

method, under which “[t]he court sets some

percentage of the recovery as a fee," with the lodestar

method, "under which the district court scrutinizes

the fee petition to ascertain the number of hours

reasonably billed to the class and then multiplies that

figure by an appropriate hourly rate”)). In this case,

Lead Counsel acknowledged that 25% of the fund

would amount to a 1.39 multiplier of Lead Counsel’s

lodestar. See Pl. Mem. at 9.

On May 23, 2016, the Court received an objection to

the fee award, from the Isaacson/Weaver Family

Trust (the “Trust” or “Objector”). See Dkt. No 113

(hereafter “Obj. Mem.”). The Trust objected to any

award above the lodestar, primarily on the basis that

such an award would be inconsistent with the

Supreme Court’s admonition in Perdue v. Kenny A. ex

rel. Winn that, when calculating “an attorney’s fee[]

under federal fee-shifting statutes ... there is a strong

presumption that the lodestar is sufficient.” 559 U.S.

542, 546 (2010). No additional objections to the

settlement or fee application were received from any

26a

class members. See June 13, 2016 Tr. at 4 (Dkt. No.

125).

On June 13, 2016, the Court held a settlement

fairness hearing to discuss both the proposed

settlement and Lead Counsel’s request for fees. See

generally June 13, 2016 Tr. At that hearing, the Court

heard argument from Lead Counsel and the Objector

as to the reasonableness of the fee request. See id. at

12-35.

On June 16, the Court issued orders approving the

plan of allocation of the net settlement fund and the

class action settlement, but reserved on the question

of attorney’s fees. Dkt. Nos. 123, 124. The Court now

addresses Lead Counsel’s application for attorney’s

fees amounting to 25% of the common fund and the

Objector’s arguments that the fee award should be

limited to the lodestar. For the reasons that follow,

Lead Counsel’s application for fees is granted in its

entirety.2

II. The Objection

In opposition to Lead Counsel’s requested fee, the

Objector raises two principal arguments. First, and

primarily, the Objector argues that Supreme Court

precedent requires this Court to apply a “‘strong

presumption’ that the lodestar figure is reasonable,” a

legal standard that would preclude the award of a

lodestar multiplier in all but the most extraordinary

of cases. See Perdue, 559 U.S. at 554; City of

Burlington v. Dague, 505 U.S. 557, 562, 567 (1992)

(holding that such a presumption applies when a

court awards fees pursuant to a fee-shifting statute).

No party has objected to the reimbursement requests for

costs and Lead Plaintiff’s expenses, which the Court deems

reasonable and approves.

27a

Were the Objector correct, it would follow that the

Court would lack the discretion- absent a finding that

this case were “‘rare’” and “‘exceptional’”—to award

Lead Counsel a fee higher than its lodestar. Perdue,

559 U.S. at 552 (quoting Penn. v. Delaware Valley

Citizens’ Council for Clean Air, 478 U.S. 546, 565

(1986)).

Second, were the Court to reject the Objector’s legal

argument and conclude that it has discretion to

award a lodestar multiplier without such a finding,

the Objector argues that the Court should, in its

discretion, decline to award a fee that would result in

any lodestar enhancement. Obj. Mem. at 11-21.

The Court addresses each argument in turn. In

summary, the Court concludes, first, that the

presumption against a lodestar enhancement

articulated in Dague and Perdue when a court awards

a reasonable attorney’s fee from a defendant pursuant

to a fee-shifting provision does not apply to the award

of fees in this case from a common fund created after

a settlement. Second, evaluating the fee request using

the common fund principles articulated in Goldberger,

the Court finds the request reasonable and approves

it in full.

III. The Legal Standard Governing the Award of

Fees in this Case

The Court first addresses the Objector’s primary

argument: that, in awarding fees in this case, the

Court must apply a “‘strong presumption’ that the

lodestar figure is reasonable,” and thus has little to

no discretion to award a lodestar enhancement or a

percentage of the fund that would exceed the lodestar.

Perdue, 559 U.S. at 554. The Court disagrees.

28a

In the American system, “parties to a lawsuit

usually bear their own expenses, regardless of which

party prevails.” Florin v. Nationsbank a/Georgia,

NA., 34 F.3d 560, 562 (7th Cir. 1994). At least two

prominent exceptions exist to this general rule,

however. First, Congress has inserted fee-shifting

provisions in certain statutes - provisions that permit

prevailing plaintiffs to seek compensation from

defendants for “the costs they incurred to enforce

[their] rights.” Id. at 563. Second, a case may result in

the creation of a “common fund”—a fund created,

often after settlement, for the benefit of the plaintiff

class. “In such a case, the defendant typically pays a

specific sum into the court, in exchange for a release

of its liability”—often (although not always) including

a release from any “potential liability for statutory

attorney’s fees.” Id. at 563-64. In the context of a

common fund (as is this case here), the defendant’s

liability is generally “fixed-it cannot exceed the

amount of the common fund the defendant has agreed

to pay,” regardless of the award of attorney’s fees. Id.

at 564.

In the context of an award of fees from a common

fund created after settlement, the Second Circuit has

held that a court has a great deal of discretion in

calculating a reasonable fee. See Goldberger, 209 F.3d

at 47. A court may employ the lodestar method,

“under which the district court scrutinizes the fee

petition to ascertain the number of hours reasonably

billed to the class and then multiplies that figure by

an appropriate hourly rate,” or the percentage

method, under which “[t]he court sets some

percentage of the recovery as a fee.” Id. In either case,

a district court has considerable discretion to award a

fee reflecting a lodestar enhancement designed to

compensate attorneys for, inter alia, “the risk of the

29a

litigation.” Id.; see also McDaniel v. Cty. of

Schenectady, 595 F.3d 411, 425-26 (2d Cir. 2010)

(affirming this framework).

In contrast, in the context of an award of fees

directly from a defendant pursuant to a fee-shifting

statute, the Supreme Court has held that a district

court’s discretion is far more limited. As the Objector

notes, in calculating such a fee, “there is a ‘strong

presumption’ that the lodestar figure is reasonable.”

Perdue, 559 U.S. at 554. Although that presumption

may be overcome, it is only the “rare circumstance[]”

that would ever justify requiring a defendant to pay

an enhancement to the lodestar. See id.; see also

Dague, 505 U.S. at 562.

The Objector argues that, notwithstanding the fact

that courts in this Circuit routinely apply the

Goldberger methodology to calculate a reasonable

attorney’s fee from a common fund created after

settlement of a securities class action, the “strong

presumption”

against

lodestar

multiplier

articulated in Perdue and Dague must apply in this

case. See Obj. Mem. at 1-2. The Objector bases this

conclusion on two interlocking premises. First,

although the Objector concedes that Perdue and

Dague addressed how courts should calculate a

statutory award of fees from a defendant pursuant to

a fee-shifting provision, it argues that the

presumption against a lodestar multiplier articulated

in these cases necessarily applies where counsel seeks

an award of attorney’s fees from a common fund if the

claims settled themselves allowed for fee-shifting. See

id. at 2 (arguing that the alternative would create

“perverse incentives and place[] the[] interests [of

class counsel] in conflict with interests of the class”).

Second, the Objector argues that the claims in this

case are indeed governed by fee-shifting provisions,

30a

such that the Dague and Perdue presumption must

apply. See id.

The Court addresses each of these premises (both of

which must be adopted for the Objector’s position to

be correct), and rejects each of them. For two

independent reasons, then, the Court holds that the

common fund principles articulated in Goldberger,

and not the statutory fee-shifting principles

articulated in Dague and Perdue, govern the award of

fees in this case, and that the Court has discretion to

award a lodestar enhancement.

A. The Perdue Presumption Against a Lodestar

Enhancement Does Not Apply When a Court

Awards Fees from a Common Fund Created

after a Settlement

The first premise of the Objector’s argument is that

the presumption against a lodestar multiplier

articulated in Dague and Perdue—two Supreme Court

cases addressing the calculation of a reasonable

attorney’s fee pursuant to a fee-shifting statute—

applies even when a court awards fees from a

settlement fund pursuant to equitable principles,

provided that the claims settled were themselves

subject to fee-shifting provisions. The Court

disagrees.

In Dague and Perdue, the Supreme Court reviewed

two awards of attorney’s fees made pursuant to feeshifting regimes. In Dague, the district court awarded

fees to the plaintiff after finding the plaintiff a

“substantially prevailing party,” entitled to an award

of fees under both the Solid Waste Disposal Act and

the Federal Water Pollution Act. 505 U.S. at 559. In

Perdue, children in the Georgia foster care system

brought a class action asserting violations of 42

U.S.C. §1988. 559 U.S. at 547. After the parties

31a

entered a consent decree, the plaintiffs submitted a

request for fees pursuant to the fee-shifting

provisions of§ 1988. Id. In both Dague and Perdue,

the respective district courts, in calculating the fee

awards in question, required the defendant to pay a

fee that reflected an enhancement to the lodestar. See

Dague, 505 U.S. at 560; Perdue, 559 U.S. at 548. In

each case, the Supreme Court reversed. Interpreting

the fee-shifting provisions at issue, each of which

allowed for the award of a “reasonable attorney[’s]

fee[]" to the prevailing or substantially prevailing

party, Dague, 505 U.S. at 561-62; Perdue, 559 U.S. at

550, the Supreme Court held that, in the context of

such awards, “there is a ‘strong presumption’ that the

lodestar figure is reasonable,” id. at 554. Although

declining to hold that a district court may never

enhance a lodestar in awarding such a fee, the Court

noted that such an enhancement would only be

permissible in “rare” and “exceptional” circumstances.

Id. at 543 (internal quotation marks omitted). Such

an enhancement would not be appropriate on the

basis of contingency risk. Dague, 505 U.S. at 567.

The Objector concedes that neither Dague nor

Perdue addressed the award of fees from a common

fund created after a settlement. Nevertheless, the

Objector argues that the limitations articulated in

Dague and Perdue necessarily apply to such a

scenario when the claims are brought pursuant to a

statute that would allow class counsel to move, after a

finding of liability, for an award of fees from a

defendant. According to the Objector, this conclusion

flows both from the analysis of Dague and Perdue,

and from a simple normative argument: that any

alternative conclusion would mean counsel could

achieve a higher award if it seeks funds from a

settlement under equitable principles than if it moves

32a

for attorney’s fees from the defendant directly

pursuant to a statute, which would create a

problematic incentive for lead counsel to settle a case

through the creation of a common fund, rather than

either seek a settlement that does not resolve the

issue of attorney’s fees or eschew settlement in favor

of seeking a verdict. See Brytus v. Spang & Co., 203

F.3d 238, 247 (3d Cir. 2000) (“[T]here remains the

possibility that in some cases counsel for a class of

plaintiffs may receive a higher fee award upon

settlement than they would have received had the

case proceeded to judgment.”).

The Objector’s argument is not without force.

Neve1iheless, the Court holds that the presumption

articulated in Dague and Perdue does not apply in the

context of an award of fees from a settlement fund,

even if a statute would permit a party to otherwise

seek a statutory fee award directly from a defendant.

The Court reaches this conclusion for two reasons:

First, although the Second Circuit has never

addressed the issue the Objector raises directly, its

holdings and dicta strongly disclaim the Objector’s

position. And second, other circuits, which have

directly addressed the question, have persuasively

concluded that Dague and Perdue do not, as either a

statutory or policy matter, extend to the equitable

award of fees from a common fund, and the Court

agrees with their reasoning.

Second Circuit Precedent Strongly

Indicates that Common Fund Principles,

not Statutory Fee-shifting Principles,

Govern an Award of Attorney’s Fees from a

Common Fund Created After Settlement

First, although the Second Circuit has never

addressed the precise question the Objector raises—

33a

its holdings and reasoning in other cases strongly

suggest an understanding that the Dague and Perdue

presumption does not apply when a court awards fees

from a common fund.

The most obvious place to begin is Goldberger. As

Lead Counsel observes, the leading case in this

Circuit holding that a district court may enhance a

lodestar when awarding fees from a common fund

itself involved claims brought under Section 10(b) of

the Exchange Act, and Rule 10b-5 promulgated

thereunder. See Goldberger, 209 F.3d at 45; id. at 47

(affirming that a “district court may, in its discretion,

increase the lodestar by applying a multiplier based

on ‘other less objective factors,’ such as the risk of the

litigation and the performance of the attorneys”). In

Goldberger, the Second Circuit nowhere addressed

the possibility that attorney’s fees might be available

in a 10b-5 class action—likely because, as the Court

explains, infra, the Second Circuit has long held that

such fees are not available to prevailing parties in

such actions. See Cotton v. Slone, 4 F.3d 176, 181 (2d

Cir. 1993). Nevertheless, the Second Circuit has since

applied the Goldberger standard in the context of

statutes that clearly contain fee-shifting provisions,

suggesting that the Circuit understands equitable and not statutory-fee-shifting - principles to apply to

such an award even where a statute contains a feeshifting provision. See McDaniel, 595 F.3d at 415,

417-18 (analyzing the district court’s assessment of

the Goldberger factors in the context of claims

brought pursuant to 42 U.S.C. §1983). Were the

Objector correct, the legal standards articulated in

Goldberger and McDaniel (not to mention in

34a

numerous district court decisions in this circuit)

would be erroneous.3 3

Although much of the reasoning in Goldberger and

McDaniel is inconsistent with the Objector’s position,

the Objector rightly observes that in neither case did

the Second Circuit squarely address the scope and

implications of Dague. Nevertheless, dicta in

Goldberger, and a holding in an earlier Second Circuit

case, further support the conclusion that Dague is

limited to statutory fee awards. First, in Goldberger,

in a footnote, the Second Circuit noted that counsel

had argued that the district court “erroneously relied

on the strictures against risk multipliers in statutory

fee-shifting cases ... in which Congress has provided

by statute for the recovery of fees from losing

defendants.” Id. at 54 n.3. The Second Circuit found

the district court had not held that it was unable to

award a risk multiplier, and thus the Circuit did not

need to determine whether reversal would be

warranted on this ground (and in any case, as noted,

the objection did not presuppose that attorney’s fees

are readily available in a 10b-5 action). Id.

Nevertheless, in citing counsel’s argument, the panel

noted that “[c]ourts have held such strictures

inapplicable to cases like this, where the lawyers seek

fees from a common fund they won for plaintiffs,” and

favorably cited Florin, a case in which the Seventh

Circuit rejected the precise argument the Objector

makes here. See id. (citing 34 F.3d at 564-65).

Prior to Goldberger, the Second Circuit addressed a

distinct but related argument in County of Suffolk v.

Long Island Lighting Co., and provided analysis

As Lead Counsel correctly observes, adoption of the

Objector’s position would “mark a drastic change in securities

class-action jurisprudence.” Pl. Reply at 1.

35a

which again cuts against the Objector’s position. 907

F.2d 1295 (2d Cir. 1990). In Suffolk, plaintiffs brought

claims against a set of defendants for, inter alia,

violating the Racketeering Influenced and Corrupt

Organizations Act, 18 U.S.C. §1961, et seq. (1988)

(“RICO”). Id. at 1300. After a trial resulting in a

verdict in favor of the plaintiffs on the RICO claims,

the district court granted judgment to the defendants

on those claims and thereafter certified a class of

plaintiffs pursuing the remaining claims. Id. at 1301.

After the class settled with the defendants, Suffolk, a

plaintiff in the action, opted out of the class and

appealed the district court’s dismissal of the RICO

claims. Id. at 1302. Notwithstanding its objection to

the settlement and its appeal, Suffolk moved for an

equitable disbursement of attorney’s fees from the

settlement fund, on the ground that Suffolk’s counsel

had provided a substantial benefit to the class. See id.

at 1326-27. The district court denied the request on

the grounds, inter alia, that were Suffolk to prevail in

its appeal, it would have “an independent basis for

recoupment of its attorney’s fees” under the RICO feeshifting provision. Id. at 1327.

The Second Circuit affirmed the district court’s

dismissal of the RICO claims, but reversed its

decision as to attorney’s fees, relying on analysis that

undercuts the Objector’s position. See id. at 1327-38.

Assessing the interplay between a fee-shifting statute

and an award of fees from a common fund, the court

explained that “fee-shifting statutes are generally not

intended to circumscribe the operation of the

equitable fund doctrine.” Id. at 1327. The court

acknowledged that “[d]uplicative recovery is to be

avoided,” and that if “under a particular combination

of facts, the operation of the equitable fund doctrine

conflicts with an intended purpose of a relevant fee-

36a

shifting statute, the statute must control and the

doctrine must be deemed abrogated to the extent

necessary to give full effect to the statute.” Id. Such

was not the case, however, in Suffolk, where “[t]he

action intended to be encouraged ha[d] already been

commenced and prosecuted.” Id.

Suffolk does not foreclose the possibility that a feeshifting statute could limit a court’s discretion in

awarding fees from the common fund. Its analysis,

however, argues against the conclusion that such a

limitation would be imported in the ordinary case.

Both Dague and Perdue involved, at least in part, the

interpretation of the text of fee-shifting provisions.

See Perdue, 559 U.S. at 550; Dague, 505 U.S. at 56162; see also Florin, 34 F.3d at 564 (explaining that

“Dague, by its terms, applies only to statutory feeshifting cases, and its reasoning is largely based on

the statutory language of fee-shifting provisions”). If

fee-shifting provisions are not generally intended to

circumscribe operation of the equitable fund doctrine,

it follows that there is little basis for importing a

presumption rooted in the text of these provisions into

the award of fees in a context not governed by that

text. Additionally, the Suffolk court suggested that

application of the equitable fund doctrine was

consistent with the central purpose of fee-shifting

provisions, which it described as “to encourage the

prosecution of certain favored actions by private

parties.” Id. at 1327. The availability of the common

fund doctrine provides an additional avenue for

lawyers retained on contingency to receive reasonable

compensation, and is thus not inconsistent with this

stated purpose.

In sum, although the Second Circuit has not

directly addressed the issue before this Court, its

prior holdings and analysis suggest the conclusion

37a

that Dague and Perdue are limited to the context they

purport to address: the award of fees pursuant to a

specific statute from a defendant, rather than the

award of fees pursuant to equitable principles from a

common fund.

2. Persuasive Precedent from Other Circuits

Further Disputes the Objector’s Position

Although the Second Circuit has not directly

addressed the question the Objector raises, two

circuits have squarely addressed this question. See

Staton v. Boeing Co., 327 F.3d 938, 967- 69 (9th Cir.

2003); Florin, 34 F.3d at 563-64.4 Each has held that

common fund principles that allow for lodestar

enhancements, and not statutory fee-shifting

principles that do not, govern the award of funds from

a settlement even where the settled claims contain

fee-shifting provisions, and the Court finds the

reasoning in these decisions persuasive.

4 In Staton, the Ninth Circuit identified the Third Circuit as

having also held that “there is no preclusion on recovery of

common fund fees where a fee-shifting statute applies.”

Staton, 327 F.3d at 967 & n.18 (citing Brytus, 203 F.3d at

246-47). Although, as this Court explains, infra, language in

Brytus indeed supports Counsel’s position in this case, see

infra pp. [46a-48a] it stretches the language of that decision

to read it as squarely addressing the Objector’s argument in

this case. See Brytus, 203 F.3d at 246 (“This, of course, is not

a case that was concluded by settlement. This case was tried

to judgment, and a fee awarded on that basis. We are not

inclined to base our ruling on some hypothetical situation

that might be presented in the future.”); id. at 244

(“[Counsel’s argument] presupposes that the Dague bar is

inapplicable and that counsel in common fund cases are

entitled to a multiplier for risk of contingency, an issue we

need not decide today.”).

38a

In Florin, the Seventh Circuit held that “common

fund principles properly control a case which is

initiated under a statute with a fee-shifting provision,

but is settled with the creation of a common fund.” Id.

at 564. Analyzing the scope of Dague, the panel

explained that “Dague, by its terms, applies only to

statutory fee-shifting cases,” and concluded that “its

reasoning is largely based on the statutory language

of fee-shifting provisions.” Id. Given that such

statutes do not address the award of fees from a

common fund—an award made pursuant not to

statute, but to a court’s inherent powers to effect

equity—the Seventh Circuit held that Dague’s

holding does not apply in such a context. See id.

Turning to the policy considerations animating

Dague, the Seventh Circuit further concluded that

such considerations do not support application of the

Dague holding in the equitable fund context. As the

panel explained, “[u]nlike in fee-shifting cases ..., the

fee award in a common fund case is ultimately

charged against the plaintiffs’ fund, rather than

directly against the defendant. Thus, the defendant’s

liability is fixed-it cannot exceed the amount of the

common fund the defendant has agreed to pay.” Id.

Accordingly, any risk of “unduly burdening the

defendant with a multiplier to compensate for risk of

loss” is not present. Id. (internal quotation marks

omitted). The Seventh Circuit explained that this

distinction between awarding fees directly from the

defendant and awarding such fees from a fund

created for the benefit of the plaintiffs was a material

one, not simply a formal one: in contrast to taxing a

losing defendant with a lodestar enhancement,

awarding a fee from a common fund taxes plaintiffs,

who, in contrast to the defendant, benefited from an

attorney taking the case with no guarantee of

39a

compensation, as well as from the creation of the fund

itself. See id. at 565 (“[T]here is no injustice in

requiring plaintiff class members to shoulder the

burden of compensating counsel for prosecuting the

class’ case without any assurance of compensation.”).

Finally, the Seventh Circuit explained that

allowing an award of fees from a common fund was in

no way inconsistent with the goal of the fee-shifting

provisions in question. In the Seventh Circuit’s

estimation, such fee-shifting provisions have two

purposes: to shift the burden of paying expenses to

defendants and, more broadly, to “enabl[e]

meritorious plaintiffs who would not otherwise be

able to afford to bring a lawsuit under [the statute], to

pursue their claims.” Id. at 564; see also id. at 562-63

(“These fee-shifting statutes were enacted for the

purpose of encouraging the private prosecution of

certain favored actions, by requiring defendants who

have violated plaintiffs’ rights to compensate

plaintiffs for the costs they incurred to enforce those

rights.” (citing Suffolk, 907 F.2d at 1327)). Under the

common fund doctrine, although funds come from the

settlement fund, the fund itself is paid for by

defendants, and it is understood during negotiations

that the settlement fund will cover attorney’s fees.

See id. at 564. More significantly, the availability of

the common fund doctrine, not unlike the existence of

a fee-shifting provision, serves as another way of

incentivizing counsel to take a case notwithstanding

plaintiffs’ inability to pay. The Seventh Circuit thus

held that the doctrine “comports with the” policy of

fee-shifting provisions - to encourage the bringing of

such suits—and there is no reason to infer that the

statute should be read to abrogate the use of common

fund principles.

40a

On the basis of these distinctions - both textual and

normative—as well as the court’s understanding of

the interaction between a fee-shifting provision’s

purpose and the equitable fund doctrine, the Seventh

Circuit held that a risk multiplier was indeed

available in the equitable context of awarding a fee

from a common fund created for the benefit of

plaintiffs, even if not in the statutory context of

awarding a fee from the defendant pursuant to a feeshifting provision. See Florin, 34 F.3d at 565.

The Ninth Circuit subsequently reached the same

conclusion. In Staton, the court addressed “whether

the existence of potentially applicable fee-shifting

statutory provisions precludes class counsel from

recovering attorneys’ fees under the common fund

doctrine,” and concluded that it does not. 327 F.3d at

967-69; see also id. at 967 (making clear that a risk

multiplier would be permitted under common fund

principles, although not under statutory fee-shifting

principles). Explaining its decision, the court began

by discussing the nature of the common fund doctrine.

Although the general rule that “attorney’s fees ... are

not a recoverable cost of litigation ‘absent explicit

congressional authorization’” would preclude a court

from awarding a fee from a defendant absent

affirmative authorization in a statute, Key Tronic

Corp. v. United States, 511 U.S. 809, 814 (1994)

(quoting Runyon v. McCrary, 427 U.S. 160, 185 (1976)

(citing Alyeska Pipeline Service Co. v. Wilderness

Society, 421 U.S. 240,247 (1975))), the Ninth Circuit

explained that that background rule would “not

prohibit the award of fees under the common fund

doctrine,” Staton, 327 F.3d at 968; see also Boeing Co.

v. Van Gemert, 444 U.S. 472, 481 (1980) (noting that,

in a case where the defendant’s liability was fixed by

the settlement amount, “the common-fund doctrine, ...

41a

is entirely consistent with the American rule against

taxing the losing party with the victor’s attorney’s

fees”). Thus, while a court would require specific

congressional authorization to shift fees from a losing

party to a prevailing party, the opposite presumption

would apply to the availability of a common fund

award: Congress would have to have “forbidden the

application of the common fund doctrine in cases in

which attorneys could potentially recover fees under

the type of fee-shifting statutes at issue here” for that

doctrine—otherwise

available

under

general

equitable principles—to be abrogated. Id. at 968

(emphasis added). The Ninth Circuit went on to hold,

as had the Seventh Circuit, that the intent to render

unavailable a common fund award could not be

inferred from the existence of such fee-shifting

provisions, in part because “[t]he intent of the feeshifting provisions ... is not countered by the

application of common fund principles.” Id.

In addition to its core argument, the Ninth Circuit

also

cited

two

additional

and

persuasive

considerations. First, the court observed that

“contingent fee agreements between counsel and

client are valid in cases where statutory fees are

available,” and “[c]ommon fund fees are essentially an

equitable substitute for private fee agreements.” Id.

Second, the court cited to a previous Ninth Circuit

case that had stated, in holding that the Dague

presumption does not generally apply in the context

of an award of fees from a common fund, that “the

concerns expressed in Dague about unduly burdening

losing parties in statutory fee cases are not present in

common fund cases where fees are paid out of the

settlement fund. How the fund is divided between

members of the class and class counsel is of no

concern whatsoever to the defendants who

42a

contributed to the fund.” In re Washington Pub.

Power Supply Sys. Sec. Litig., 19 F.3d 1291, 1301 (9th

Cir. 1994).

This Court agrees with these cases and their

collective reasoning: Dague and Perdue relied on

interpretations of specific statutory provisions to hold

that a lodestar multiplier would rarely be available

when a plaintiff moves for a reasonable attorney’s fee

from a defendant pursuant to a fee-shifting statute.

As Florin, Staton, and Suffolk persuasively explain,

an award of fees under equitable principles is not

governed by these statutes, nor subject to their text;

the normative analyses in these cases neither

requires—nor suggests—that the Dague and Perdue

presumption should be applied when a court awards

fees from a common fund; and none of the purposes of

these fee-shifting provisions is obviously compromised

by application of common fund principles.

Finally, the Court observes two additional reasons

that Dague and Perdue do not apply in the common

fund context. First, as noted, Florin and Staton both

find it significant that a statutory fee is taxed directly

to a defendant, whereas an award from a common

fund—although it comes from funds provided by the

defendant—is taxed to the class’s recovery. This

distinction is significant for an additional reason not

identified in these cases: Plaintiffs, unlike

defendants, are capable of avoiding the potential for

any lodestar enhancement by opting to pay their

counsel directly as the case progresses, rather than

hire counsel on contingency. In electing to hire

counsel on a contingent basis, plaintiffs trade the risk

of footing the bill in the event of non- recovery for the

possibility that counsel may end up being paid more

than what plaintiff would have had to pay for a noncontingent arrangement (which presumably would

43a

approximate the lodestar). It is plainly unfair to tax

the defendant for the plaintiffs choice to proceed in

such a manner—i.e. to charge a defendant directly for

contingency risk—as such a policy would have the

effect of requiring the defendant to internalize the

downside of the plaintiffs gamble, while providing

plaintiff the upside of that gamble. But it is not unfair

to tax such an enhancement against the plaintiff, or,

here, the plaintiff class, which thus internalizes the

benefits and detriments of the contingency agreement

to which the plaintiffs explicitly or implicitly agreed.

See Goldberger, 209 F.3d at 47 (noting that the

availability of a fee from the common fund derives

from equitable principles, and the “rationale for the

doctrine is an equitable one: it prevents unjust

enrichment of those benefitting from a lawsuit

without contributing to its cost”).

Second, although the Objector cites potential (and

not unpersuasive) incentive problems with allowing

for a lodestar enhancement in the common fund

context, he fails to grapple with the significant

benefits to permitting a district court the discretion to

award such enhancements—benefits which may serve

a class and, in turn, the purposes of fee-shifting

regimes. The Second Circuit has held that the

availability of the percentage method to calculate a

fee award from a common fund can serve as a benefit

to the class in two ways: first, by aligning counsel’s

incentives with the class at the time the settlement is

negotiated (by tying counsel’s recovery to the size of

the fee) and second, by counteracting any incentive

counsel might have to eschew early settlement so as

to increase their lodestar over the course of protracted

litigation. See Wal-Mart Stores, Inc. v. Visa US.A.,

Inc., 396 F.3d 96, 121 (2d Cir. 2005) (“The trend in

this Circuit is toward the percentage method, which

44a

directly aligns the interests of the class and its

counsel and provides a powerful incentive for the

efficient prosecution and early resolution of

litigation.” (internal quotation marks and citation

omitted)); McDaniel, 595 F.3d at 419 (acknowledging

problems with the percentage method, but

nevertheless explaining that “the percentage method

has the advantage of aligning the interests of

plaintiffs and their attorneys more fully by allowing

the latter to share in both the upside and downside

risk of litigation”); Hayes v. Harmony Gold Min. Co.,

509 F. App’x 21, 23-24 (2d Cir. 2013) (summary order)

(affirming an awarded fee of one third of a $9 million

settlement, and noting that “the prospect of a

percentage fee award from a common settlement

fund, as here, aligns the interests of class counsel

with those of the class”); Hayes v. Harmony Gold Min.

Co., No. 08 CIV. 03653 (BSJ), 2011 WL 6019219, at *1

(S.D.N.Y. Dec. 2, 2011) (providing the details of the

settlement and fee award). Of course, at the time a

fee is awarded from a settlement fund, there is no

question that a lower fee benefits the class - insofar as

the class receives a greater percentage of the fund.

But the incentive structure created by the availability

of a lodestar multiplier or percentage-of-the-fund

recovery is, in the aggregate, beneficial to the class. It

is these benefits that support the determination that

a district court should have discretion to rely on the

percentage method when appropriate, and nothing in

Dague or Perdue suggests the intention to eliminate

this discretion.

In response to this precedent - from the Second

Circuit and beyond—the Objector points to several

circuit opinions he claims have adopted his position.

Obj. Mem. at 8-10. None of these cases addresses the

45a

question before this Court or is directly contradictory

to the Court’s conclusion.

First, in Pierce v. Visteon Corp., the Seventh Circuit

addressed a scenario distinct from that at issue here:

when a court awards fees (after a verdict) pursuant to

a fee-shifting statute, and then lead counsel moves for

additional fees from a damages award under common

fund principles. 791 F.3d 782, 786 (7th Cir. 2015)

(“[C]ounsel asks us to put ERISA to one side and hold

that he is entitled, in addition to $303,000 from [the

defendant awarded pursuant to a fee-shifting

provision after a verdict], to a supplemental award

from the class.”). The court held that such an

additional award would “undercut if not countermand

Dague and similar decisions.” Id. at 787. It is true

that, notwithstanding the factual context of its

holding, some of the language in Pierce appears to

support the Objector’s position. See id. (“Three

principle reasons justify limiting the common-fund

approach to cases outside the scope of a fee-shifting

statute.”). Nevertheless, the Seventh Circuit’s holding

was limited to the facts of the case, see id. (“A

common-fund award ... often builds in a multiplier in

the cases where counsel prevails. Adding a commonfund award to a statutory ‘reasonable’ fee would

undercut if not countermand Dague and similar

decisions.”), and the court at no point addressed or

purported to overturn Florin. Although it is possible

for one panel in the Seventh Circuit to overturn a

prior panel, it is hard to imagine that the Pierce panel

intended to do so sub silentio and without analysis.

See United States v. Reyes-Hernandez, 624 F.3d 405,

412 (7th Cir. 2010) (citing the “long-standing

principle [in the Seventh Circuit] that [a panel] may

not overturn circuit precedent without compelling

reasons”).

46a

In Brytus, the Third Circuit addressed the same

hybrid scenario (where a court awards a fee pursuant

to a fee-shifting statute, and counsel then moves for

an additional award from a common fund), and held

that a district court did not abuse its discretion in

declining, in such a situation, to award additional

fees. See 203 F.3d at 247. The court explicitly

distinguished the hybrid scenario from the scenario in

this case. See id. at 246 (“This, of course, is not a case

that was concluded by settlement. This case was tried

to judgment, and a fee awarded on that basis.”).

Further, the Brytus court made clear that it was

deciding no more than that the district court acted

within its discretion in declining to provide the

requested enhancement even in the hybrid scenario not whether or not such fees could ever be available.

See id. at 243 (“[T]he fact that a common fund has

been created does not mean that the common fund

doctrine must be applied in awarding attorney’s fees,

a suggestion that is implicit in counsel’s argument.”

(emphasis added)). It did not conclude that such an

enhancement was not available should a court choose

to award it.

Of particular note, in Brytus, the Third Circuit

addressed the Objector’s normative argument in this

case - that distinctions in how fees are awarded in the

common fund and statutory contexts could create

perverse incentives for counsel - and rejected it. Lead

counsel argued in Brytus that, if the court declined to

award additional common fund fees in addition to the

statutory award, the fact that such fees would have

been available had the case settled through creation

of a common fund would create problematic

incentives. See id. at 246 (“Of the many additional

arguments counsel raise, the one that we believe

requires some discussion is their contention that the

47a

District Court penalized them for proceeding to

judgment, which resulted in the award of a statutory

fee, whereas they would have been entitled to a fee

under the common fund doctrine had they accepted a

settlement. Counsel argue that, as a result, lawyers’

self-interest might lead them to accept an otherwise

inadequate settlement rather than rely on the

vagaries of a court-awarded counsel fee.”). The Third

Circuit acknowledged this possibility, but stressed,

inter alia, that “the distinction between the statutory

fee and the fee from a common fund is more than the

amount of the fee; it is the party who pays the fee,”

and made clear that “by far the largest number of

ERISA cases to apply the common fund analysis are

those that were settled, which, as we have noted,

present a different circumstance.” Id. at 247; see also

id. at 248 (Stapleton, J., dissenting) (suggesting his

“colleagues are content to have one set of principles

apply to settlements and another to judgments”).5 The

Third Circuit thus not only did not adopt the

Objector’s position in, but in fact rejected it.

Finally, in Haggart v. Woodley, the Federal Circuit

similarly held that an additional enhancement from a

common fund is not generally available after a party

receives funds pursuant to a fee-shifting provision.

809 F.3d 1336, 1341-42 (Fed. Cir.), cert. denied, 136 S.

Ct. 2509 (2016) (addressing a scenario where the

parties reached a settlement awarding a statutory

5 The one judge who dissented from the majority’s position

did not endorse any variation of the Objector’s position in this

case. Instead, he argued that courts should generally permit

an additional award from a common fund created after

judgment in addition to a statutory fee, a holding he

suggested would have the effect of eliminating the incentive

issues the Objector invokes. See id. at 247-248.

48a

attorney’s fee, and then class counsel moved for an

additional award from the settlement fund under the

common-fund doctrine). Although some of the

language in Haggart supports the Objector’s position,

the Government in that case argued, and the Court

held, that “[t]here is no basis in equity for awarding

common-fund fees as well as [statutory] fees.” Id. at

1355 (emphasis added).

Whether or not Haggart, Pierce, and Brytus were

correctly decided (and the Court notes that the

Second Circuit has not yet weighed in on the hybrid

scenarios at issue in these cases), it is evident their

holdings do not apply to the present case.

In sum, the Second Circuit has suggested—

although not explicitly held—that statutory feeshifting principles do not govern the award of a fee

from a common fund created after settlement even

when a statute contains a fee-shifting provision, and

both circuits to address the question directly have

persuasively determined that the limitations in

Dague and Perdue do not apply to such a context. The

Court agrees, and holds that the presumption against

a lodestar enhancement in statutory fee-shifting cases

does not limit a court’s discretion to award such an

enhancement in calculating a reasonable attorney’s

fee from a common fund, even where the claims

settled are otherwise subject to fee-shifting

provisions.

B. In Any Event, the Claims Asserted in this

Case Do Not Contain Fee-Shifting Statutes

Analogous to Those in Dague and Perdue

Even were the Court to hold that the presumption

against a lodestar enhancement at issue in Dague

governs the award of attorney’s fees from a common

fund created after a settlement- a proposition the

49a

Court rejects—the Court would still disagree that

such a presumption applies in this case. That is

because no claim settled in this case contains a feeshifting provision analogous to that at issue in Dague

and Perdue.

As noted, the Objector’s position relies on two

premises: that Dague and Perdue apply to equitable

awards, and that the claims in this case are subject to

fee-shifting provisions that would trigger the

presumption against a lodestar enhancement. As

justification for the second premise, the Objector cites

three fee-shifting provisions that he argues govern

the claims in this case. Obj. Mem. at 3-6. First, the

Objector points to provisions under the Securities Act

that allow the court to award attorney’s fees to either

party when the court “believes the suit or the defense

to have been without merit.” 15 U.S.C. §77k(e).

Second, the Objector points to provisions under the

Private Securities Litigation Reform Act of 1995

(“PSLRA”), 109 Stat. 737, that, for purposes of the

Exchange Act claims, allow the court to award

attorney’s fees as a sanction for violations of Federal

Rule of Civil Procedure 11, 15 U.S.C. §78u-4(c).

Finally, the Objector argues that, although no

additional fee-shifting provision is explicitly provided

for under the judicially- implied remedy to enforce §

1O(b)of the Exchange Act, Supreme Court precedent

requires the conclusion that the fee-shifting

provisions in Sections 9 and 18 of that Act also govern

claims brought to enforce Section 10(b). See Obj.

Mem. at 4-6 (citing Lampf, Pleva, Lipkind, Prupis &

Petigrow v. Gilbertson, 501 U.S. 350 (1991) and

Musick, Peeler & Garrett v. Employers Ins. of

Wausau, 508 U.S. 286 (1993)).

The Court addresses these arguments as follows:

first, the Court holds that the broader fee-shifting

50a

provision governing Sections 9 and 18 of the

Exchange Act is not incorporated by analogy into the

implied right-of-action under Section 10(b). As to the

remaining fee-shifting provisions provided for by

statute, the Court finds that material distinctions

between these narrower provisions and the broader

fee-shifting provisions at issue in Dague and its

progeny require the conclusion that, even if Dague

were to operate to limit a court’s discretion in

awarding fees pursuant to a common fund, such

limitation would not apply here.

Binding Second Circuit Authority

Requires the Conclusion that the Feeshifting Provisions in Sections 9 and 18 of

the Exchange Act Are Not Incorporated

by Analogy into an Action Based on

Section 10(b)

First, the Court addresses the Objector’s argument

that Section 10(b) includes, by analogy, the feeshifting provisions explicitly provided for under

Sections 9 and 18 of the Exchange Act (such that the

claims in this case are governed by fee-shifting

provisions analogous to those in Dague). As the

Objector notes, the Supreme Court has, in the past,

looked to the express causes of action under Sections

9 and 18 of the Exchange Act to define the contours of

the implied cause-of-action under §10(b). See Lampf,

501 U.S. at 360-61 (looking to Sections 9 and 18 to

determine, by analogy, the statute of limitations for

the implied cause-of-action under §10(b)); Musick, 508

U.S. at 294-97 (engaging in the same inquiry to find

that the implied cause-of-action under §10(b) includes

a right of contribution). Relying on these cases, the

Objector argues that, because Sections 9 and 18

include a broad fee-shifting provision, see 15 U.S.C. §

78i(f) (“In any such suit the court may, in its

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discretion, require an undertaking for the payment of

the costs of such suit, and assess reasonable costs,

including reasonable attorneys’ fees, against either

party litigant.”), it follows that Congress, had it had

occasion to consider the question, would have

intended for the implied cause-of-action to enforce

§10(b) to similarly include such a provision, see Obj.

Mem. at 6; see also Key Tronic Corp., 511 U.S. at 815

(“The absence of specific reference to attorney’s fees is

not dispositive if the statute otherwise evinces an

intent to provide for such fees.”).

The Objector’s argument is not without force.

Nevertheless, even were this Court inclined to adopt

the argument were it to assess it on a blank slate,

binding Second Circuit authority precludes such a

holding.

First, in Van Alen v. Dominick & Dominick, Inc.,

the Second Circuit rejected the precise argument the

Objector now makes - although without the benefit of

Lampf or Musick. 560 F.2d 547 (2d Cir. 1977). In Van

Alen, the appellees also argued that, although “no

statutory provision permit[s] the award of attorneys’

fees to a successful party in an action based on

Section 10(b) of the Securities Exchange Act of 1934,

pursuant to which Rule 10b-5 was promulgated, ...

such fees should be allowed by analogy to the express

allowance of attorneys’ fees in connection with the

two statutorily authorized private rights of action

under Sections 9(e) and 18(a) of the 1934 Act.” Id. at

553. The Second Circuit rejected this argument. Id.

The court noted that “the circumstances under which

attorneys’ fees are to be awarded and the range of

discretion of the courts in making those awards are

matters for Congress to determine.” Id. (quoting

Alyeska Pipeline Service Co., 421 U.S. at 262). In the

panel’s estimation, “Congress ha[d] been on notice

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that the courts would imply a private right of action

under Rule 10b-5 at least since the early 1950s ...

[but] ha[d] not expressly authorized fee awards in

such cases during the intervening years.” Id. at 55354 (internal citations omitted). Such history was “at

least as consistent with the thesis that Congress did

not intend to allow such awards as . . . with the thesis

put forward by appellees.” Id. at 554. The Circuit thus

held that “in the absence of a clear expression of

congressional intent, the district court properly

denied appellees’ motion for attorneys’ fees.” Id.

Van

Alen

predated

Lampf

and

Musick.

Nevertheless, in 1993, after both Supreme Court

cases had been decided, the Second Circuit again

affirmed that attorney’s fees are not available in 10(b)

actions. In Cotton v. Slone, the Second Circuit stated,

although without analysis, that “although attorney’s

fees are not permitted in actions brought solely under

section 10(b) of the Securities and Exchange Act,

attorney’s fees may be awarded on a pendent state

law claim if the claim permits such an award and if

the claimant has established the elements necessary

for recovery on the pendent state law claim.” 4 F.3d at

181; see also Mazuma Holding Corp. v. Bethke, l F.

Supp. 3d 6, 19 (E.D.N.Y. 2014) (citing to Cotton for

the same proposition). The Cotton panel did not cite

Van Alen. See Cotton, 4 F.3d at 181. The holding in

Cotton did reaffirm the Second Circuit’s position that

attorney’s fees are not generally available in an action

under Section 10(b).

The Objector does not deny this precedent. He

instead argues that any decision by the Second

Circuit holding that attorney’s fees are not available

in 10b-5 actions has been abrogated in the years

since—both by provisions in the PSLRA, and by the

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holdings in both Lampf and Musick. The Court

disagrees as to both counts.

a. The PSLRA Does Not Abrogate Van Alen

and Cotton

First, the Objector argues that the PSLRA contains

a provision which “independently authorizes district

courts to require bonds and to shift fees in any

Exchange Act case that is certified as a class action,”

and thereby abrogates the holdings in Van Alen and

Cotton. See Obj. Sur-reply at 2 (Dkt. No. 121) (citing

15 U.S.C. § 78u-4(a)(8)). Not so.

§78u-4(a)(8) of the PSLRA states as follows:

(8) Security for payment of costs in

class actions

In any private action arising under this

chapter that is certified as a class action

pursuant to the Federal Rules of Civil

Procedure, the court may require an

undertaking from the attorneys for the

plaintiff class, the plaintiff class, or both, or

from the attorneys for the defendant, the

defendant, or both, in such proportions and

at such times as the court determines are

just and equitable, for the payment of fees

and expenses that may be awarded under

this subsection.

15 U.S.C. § 78u-4 (emphasis added).

As Lead Counsel argued at the class action fairness

hearing, the text of this provision merely authorizes

securities for the payment of fees that may be

awarded under the “subsection” in which it appears.

See June 13, 2016 Tr. at 19-20. Under that

subsection, the PSLRA lays out a presumption in

favor of the award of attorneys’ fees and costs for

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violation of Federal Rule of Civil Procedure 11.

15 U.S.C. §78u-4(c)(3). Thus, the most reasonable

meaning of the text is that a security may be set aside

to ensure such a fee is available—so as to provide

teeth to any such sanctions.

Even were the Court to ignore the limitation “under

this subsection” included in the text and assume that

the provision allows for a security to be set aside to

pay any available fees, the text would still not support

the conclusion that attorney’s fees are available under

a 10b-5 suit. That is because, by its clear terms, the

provision does not create any new substantive rights

to attorney’s fees; it simply provides a mechanism for

a court to require a security to pay whatever

attorney’s fees may otherwise be available. Whether

or not such fees are available, then, is in no way

answered or addressed by the provision.

b. Lampf and Musick Do Not Abrogate Van

Alen and Cotton

Second, the Objector argues that the reasoning in

Lampf and Musick implicitly abrogates the holding in

Van Alen, such that that case’s holding no longer

binds this court. “[A]s a general rule,” prior decisions

by the Second Circuit bind subsequent panels of the

circuit - as well as district courts. Union of Needle

trades, Indus. & Textile Employees, AFL-CIO, CLC v.

US. INS., 336 F.3d 200, 210 (2d Cir. 2003). However,

there exists an exception to this rule when the prior

decision’s “rationale is overruled, implicitly or

expressly, by the Supreme Court, or the Second

Circuit court in banc.” In re S. African Apartheid

Litig., 15 F. Supp. 3d 454, 460 (S.D.N.Y. 2014) (citing

World Wrestling Entm’t Inc. v. Jakks Pac., Inc., 425 F.

Supp. 2d 484, 499 (S.D.N.Y. 2006)) (internal

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quotation marks and alteration omitted). Such is not

the case here.

First, although Van Alen was decided prior to

Lampf and Musick, Cotton was decided after both of

them. Compare Cotton, 4 F.3d at 176 (noting that the

case was argued on June 4, 1993, and decided on

September 10, 1993); with Musick, 508 U.S. at 286

(noting that the case was decided on June 1, 1993).

Cotton did not address either Lampf or Musick, or

revisit the analysis of Van Alen; nevertheless, neither

of these Supreme Court cases is an intervening

authority for purposes of the Cotton holding, an

argument the Objector makes no attempt to confront.

See Objector Sur-reply at 1.

In any event, even assuming Lampf and Musick did

operate as intervening authority in this case, “it is

insufficiently clear to this Court” that either case—

neither of which addressed statutory fee-shifting

provisions—may be read to “implicitly overrule” Van

Alen. World Wrestling Entm’t, Inc., 425 F. Supp. 2d at

500. An analysis of the reasoning and holdings of

these cases makes this conclusion evident.

In Lampf, the Supreme Court, faced with the

question of how to determine the applicable statute of

limitations for the implied cause-of-action under

section 10(b), held that, “where ... the claim asserted

is one implied under a statute that also contains an

express cause of action with its own time limitation, a

court should look first to the statute of origin to

ascertain the proper limitations period.” 501 U.S. at

359. The Court acknowledged the “state-borrowing

doctrine,” or the “usual rule that when Congress has

failed to provide a statute of limitations for a federal

cause of action,” a court should look to the “local time

limitation most analogous to the case at hand.” Id. at

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355-56. Nevertheless, faced with “the awkward task

of discerning the limitations period that Congress

intended courts to apply to a cause of action it really

never knew existed,” the Court determined that

analogous provisions in the Exchange Act, namely

Sections 9 and 18, provided a better source. Id. at

359-60. Significantly, the Supreme Court recognized

that, notwithstanding ambiguity as to Congressional

intent, “a [statute of limitations] period [had to be]

selected,” and noted that, although “[o]n rare

occasions, th[e] Court ha[d] found it to be Congress’

intent that no time limitation be imposed upon a

federal cause of action,” neither party took that

position before the Court. Id. at 356 & n.3.

Additionally, in holding that the statutes of limitation

in Sections 9 and 18 should be incorporated into

Section 10(b), the Court joined “every Court of

Appeals” that had yet assessed the question. Id. at

362.

In Musick, the Court faced the question of “whether

a right to contribution is within the contours of the

l0b-5 action.” 508 U.S. at 294. In engaging with the

question, the Court acknowledged that, in the past, it

had inquired whether particular statutes “expressly

or by clear implication envisioned a contribution right

to accompany the substantive damages right created,

or, failing that, whether Congress intended courts to

have the power to alter or supplement the remedies

enacted.” Id. at 291 (internal quotation marks and

citation omitted). The Court noted that such

investigation of Congressional intent, however, was of

limited use in explicating a judicially-created right of

action. See id. Thus, the Court turned to analogous

provisions in the Exchange Act—Sections 9 and 18—

and again determined that, because a right of

contribution was included in both express causes of

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action, Congress would have intended such a right to

exist in the context of 10(b). See id. at 295-96. Finally,

the Court noted, as it had in Lampf, that its

conclusion was “consistent with the rule adopted by

the vast majority of Courts of Appeals and District

Courts that have considered the question,” a point “of

particular importance because in the more than 20

years since a right to contribution was first

recognized for 10b-5 defendants, neither the

Securities and Exchange Commission nor the federal

courts [had] suggested that the contribution right

detracts from the effectiveness of the 10b-5 implied

action or interferes with the effective operation of the

securities laws.” Id. at 297-98 (internal citations

omitted).

There is no question that Musick, and to some

extent Lampf, lend support to the Objector’s position:

that the analogy rejected in Van Alen has been

rehabilitated by the Supreme Court. Nevertheless,

and putting aside that Cotton post-dates these

decisions—the cases do not clearly overturn binding

Second Circuit precedent for several reasons. First,

neither decision addressed the availability of

attorney’s fees, and thus neither had occasion to

confront case-law suggesting, in the fee-shifting

context, that Courts presume no such fees to be

available absent clear Congressional intent. See Key

Tronic Corp., 511 U.S. at 814-15; see also Van Alen,

560 F.2d at 553 (relying on such case-law). In Musick,

the Court did note that a search for clear intent by

Congress to create a right of contribution would be

futile in the context of a judicially created cause of

action. 508 U.S. at 291; see also id. at 291-92 (“Having

implied the underlying liability in the first place, to

now disavow any authority to allocate it on the theory

that Congress has not addressed the issue would be

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most unfair to those against whom damages are

assessed.”). Nevertheless, the presumption in favor of

the American Rule is a significant one on which Van

Alen relied, and nothing in Musick or Lampf directly

confronts it.

Second, in both cases the Supreme Court pointed

out that numerous courts had already interpreted the

private right of action under §10(b) to borrow its

statute of limitations and right of contribution from

Sections 9 and 18. See Lampf, 501 U.S. at 362;

Musick, 508 U.S. at 297-98. In contrast, the Objector

has pointed to no case that has held attorney’s fees to

be routinely available under the 10b-5 private right of

action. The distinction is relevant under the

reasoning in Musick: in that case, the Court, as noted,

found the existence of extensive supporting precedent

relevant because “in the more than 20 years since a

right to contribution was first recognized for 10b-5

defendants, neither the Securities and Exchange

Commission nor the federal courts [had] suggested

that the contribution right detracts from the

effectiveness of the 10b-5 implied action or interferes

with the effective operation of the securities laws.” Id.

at 298 (internal citation omitted). The inverse

argument would apply here: despite courts not

generally reading a fee-shifting provision into such

actions, there is no indication that that absence has

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