Petition for Writ of Certiorari — Evans v. Glass (No. 09-410)

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Otic CF THE CLERK

in The tar, Clark

Supreme Court of the Unites States

MARTY EVANS, in his individual capacity,

Petitioner,

VS.

JOSEPH GLASS, DANTE DIFRANCESCO,

RALPH CARBONE, DAVID BACHRACH, individually

and on behalf of all others similarly situated, and UBS

FINANCIAL SERVICES, INC., a corporation;

UBS PAINE WEBBER, a corporation;

PAINE WEBBER GROUP, INC., a corporation,

Respondents.

On Petition For Writ Of Certiorari

To The United States Court Of Appeals

For The Ninth Circuit

PETITION FOR WRIT OF CERTIORARI

LAWRENCE W. SCHONBRUN

LAW OFFICES OF

LAWRENCE W. SCHONBRUN

86 Eucalyptus Road

Berkeley, CA 94705

Tel: (510) 547-8070

Counsel of Record for

Petitioner Marty Evans

COCKLF LAW BRIEF PRINTING CO (800) 925-6964

OR CALI. COLLECT (402) 349-2831

QUESTIONS PRESENTED

As a result of unresolved issues arising out of two

of the most significant Supreme Court decisions on

the determination of reasonable attorneys’ fees —

Boeing v. Van Gemert, 444 U.S. 472 (1980) [herein-

after Boeing], and City of Burlington v. Dague, 505

U.S. 557 (1992) [hereinafter Dague] — conflicts have

arisen among the nation’s federal courts as to:

Issue No. 1: Whether it is permissible for a

court to calculate the fee as a percentage of the

amount of money theoretically made available to the

class without considering the amount of money actu-

ally paid to class members.

(a) If the answer to Issue No. 1 is yes, is it

also permissible (to base the fee on the amount made

available) when class members are paid directly by

the defendant on a claims-made basis, not from a

common fund? [The circumstance left unresolved in

Boeing.|

Issue No. 2: Whether it is permissible for a

court to avoid this Court’s holding in Dague, prohib-

iting enhancement for contingent risk by calculating

the fee using common fund principles. [In other

words, does the prohibition in Dague only apply when

attorneys’ fees are calculated pursuant to a fee-

shifting statute? |

QUESTIONS PRESENTED - Continued

(a) Ifthe answer to Issue No. 2 is yes, is it

permissible to apply common fund principles when,

as the instant settlement provides, (i) the attorneys’

fee is not paid from a common fund but is paid

separately by the defendant (as in fee shifting), and

(11) any court reduction in the requested attorneys’ fee

benefits the defendant, not class members (as in fee

shifting)?

Issue No. 3: Whether, if the answers to Issue

Nos. 2 and 2(a) are yes, can a court apply the

“exceptional result/superior performance” factors to

support an upward adjustment of the fee percentage,

or a positive enhancement of the lodestar in a cross-

check, based upon a finding that the class’s claim was

of questionable merit? (Petitioner believes a related

issue is currently pending before this Court in Kenny

A. v. Perdue, et al., 532 F.3d 1209 (11th Cir. 2008),

cert. granted, 129 S.Ct. 1907, 2009 LEXIS 2664, 77

U.S.L.W. 3557 (Apr. 6, 2009) (No. 08-970) [hereinafter

Perdue}.)

PARTIES TO THE PROCEEDINGS

The following were parties in the court of appeals

and are parties in this Court:

Plaintiff Class Member/

Objector and Petitioner:

Marty Evans, in his individual capacity

Plaintiffs and Respondents:

Joseph Glass, Dante Dif rancesco,

Ralph Carbone, David Bachrach, individually

and on behalf of all others similarly situated.

Defendants and Respondents:

UBS Financial Services, Inc., a corporation;

UBS Paine Webber, a corporation;

Paine Webber Group, Inc., a corporation.

In addition to the above, Shrenik Bavishi and

Anthony D’Aria were objectors in the district court

and the court of appeals. Mr. Bavishi separately pe-

titioned this Court for certiorari on June 15, 2009,

No. 08-10952. Mr. D’Aria separately petitioned this

Court for certiorari on September 16, 2009, No. 09-341.

CORPORATE DISCLOSURE STATEMENT

(Rule 29.6)

Petitioner Marty Evans is an individual. He has

no corporate parents, subsidiaries, or affiliates that

are publicly held.

TABLE OF CONTENTS

Page

QUESTIONS PRESENTED ...........:ccccsosessseccscceees i

PARTIES TO THE PROCEEDINGS ..................... ili

CORPORATE DISCLOSURE STATEMENT ........ ill

Se Pe MT I ie sesiovenevavccssnesssnevevsnncacetens iv

pr TOR Gag lye: 8 gy |. re errr vil

5g 6 oe da dc oulinsiedavaaxtuteveensesss 1

STATEMENT OF JURISDICTION .................0.... 2

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

aac ee cid bluiceis cn Cis veteekunndivecassncenss 3

STATEMENT OF THE CASB..................:0cceeesceeeees 8

REASONS FOR GRANTING THE WRIT............. 11

I. In Awarding Reasonable Attorneys’ Fees in

Class Actions, Courts Must Consider the

Amount of Money Actually Received By

A DAR TREO RT A TREO 11

II. Boeing Should Not Be Extended to Claims-

Made Class Action Settlements................... 20

Ill. The Dague Prohibition against Enhance-

ment for Contingent Risk Should Apply

When Determining a Reasonable Attorneys’

Fee under Both Statutory Fee-Shifting and

Common Fund Principles............................ 23

IV. Common Fund Principles Only Apply

When Calculating a Reasonable Attorneys’

Fee Paid from a Class Common Fund

MN So occ o cies ch vasinsxces awevaceav are seieioeeanieees 35

TABLE OF CONTENTS — Continued

Page

V. Neither an Upward Percentage Adjust-

ment nor an Enhancement of the Lodestar

Can Be Based on the Fact that the

Lawsuit’s Claims Appeared to Be without

AR AE ce Ait OTe re RE RE Mopar) Hee an ce 38

I ac ae Deas al teas 43

INDEX TO APPENDICES

Amended Memorandum Decision of the Ninth

Circuit Court of Appeals, filed May 14,

MEE aciitn cucu vepabaneibaksassesabanesuddabuedietaexiotrankiaescisbon: App. 1

Order withdrawing initial 2/9/09 Memo-

randum Decision of the Ninth Circuit

Court of Appeals, filed May 14, 2009............ App. 11

Initial Memorandum Decision of the Ninth

Circuit Court of Appeals, filed February 9,

NTL, ©.22coc ey cusses ss dias abanisaenenenaa eee App. 13

Order of the United States District Court,

Northern District of California, Granting

Joint Motion for Final Approval; Judg-

ment, filed January 26, 2007.....................08 App. 23

Order of the United States District Court,

Northern District of California, (1) Grant-

ing Joint Motion for Final Approval of

Settlement; (2) Granting Class Counsel’s

Application for Attorney’s Fees, Costs and

Class Representative Enhancements, filed

I I IN os ssa ges cd naaceces ee ecereaeenee App. 31

TABLE OF CONTENTS — Continued

Page

Order of the Ninth Circuit Court of Appeals

Denying Petition for Rehearing and Sug-

gestion for Rehearing En Banc, filed May

aa cadl Cocco sates baedeasainnbupriiesseice App. 74

In re TJX Companies Retail Security Breach

Litigation, No. 07-10162-WGyY, slip op. (D.

Mass. Nov. 3, 2008) [published at 584

F. Supp. 2d 395 (D. Mass Nov. 3, 2008)]........ App. 77

Vil

TABLE OF AUTHORITIES

Page

CASES

Amchem Prod., Inc. v. Windsor, 521 U.S. 591

NTT vou ital etalon nemeenetaneseedeeouaeameen aiadeus 34

Blair v. Equifax Check Services, Inc., 181 F.3d

A Ty Me ED ceiantnensetecinescdninssaxosisncductteshunnuisacen 7

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

Bowen v. South Trust, 760 F. Supp. 889 (M.D.

SE SEED esc cia a sssn ceeds sshedaosnms clea eoekpenatbiniieakoeibnes 32

Brytus v. Spang & Co., 203 F.3d 238 (3d Cir.

So ek eee ee 25, 32, 33

City of Burlington v. Dague, 505 U.S. 557

EE aa\ciicas calciaies ua taensnad one inadanainaientaniacnsserdies passim

City of Burlington v. Dague, 502 U.S. 1071

eECicevatkcatk tis cantouaxseccecesl apecereslasunndeldcetarcaaebevuediat: 24

Duhaime v. John Hancock Mut. Life Ins. Co.,

989 F. Supp. 375 (D. Mass. 1997).................cccssceses 19

Evans v. Jeff D., 475 U.S. 717 (1986)............cccceserssees 37

Florin v. NationsBank of Georgia, N.A., 34 F.3d

ey os Goad secskicp etna sa pasenvsvcdnvsanisenavnccass 26

Glass v. UBS Financial Services, Inc., No. C-

06-04068 MMC (N.D. Cal., San Francisco

ee as ia uasu ya cmemeacnnenaatelccceees 9

Glass v. UBS Financial Services, Inc., etc., Nos.

O7-15278 and 0O7-15309, 2009 U.S. App.

LEXIS 10328 (9th Cir., San Francisco Div.,

I oe eae Ca ware id gn sanies ins ke rise val heen L

Vili

TABLE OF AUTHORITIES — Continued

In re Bolar Pharmaceutical Co. Sec. Litig., 800

BD, FE Gates Es CODED scvrcesiexsecesiasascsesdocecses 18

In re Compact Disc Minimum Advertised Price

Antitrust Litig., 292 F. Supp. 2d 184 (D. Me.

a aaa cane ca cnahaneon 19

In re Enron Corporation Securities, Derivative

& “ERISA” Litigation, MDL No. 1446, Civ.

No. H-01-3624 (con.) (S.D. Tex., Houston

Div.) (Conclusions of Law, Findings of Fact,

and Order re Award of Attorneys’ Fees from

Settlement Fund (Dkt. 6026), Sept. 8, 2008)........... 7

In re General Motors Corp. Pick-Up Truck Fuel

Tank Prod. Liab. Litig., 55 F.3d 768 (3d Cir.

RRR ES aR sera Siwim reeaye es SA = AAS RO OO 27

In re Nineteen Appeals Arising Out of San

Juan Dupont Plaza Hotel Fire Litig., 982

FE EE GA, BI vnsickicescccsésedccsnnscienesssanenesssace 27

In re Prudential Ins. Co. of Am. Sales Practices

Litig., 962 F. Supp. 572 (D.N.J. 1997), vacated

in part on other grounds, 1998 WL 409156

I IIT 45 5056s csavagiconsesedeunhhenepaatentaekeiaessxiares 28

In re Prudential Ins. Co. of Am. Sales Practices

Litig., 148 F.3d 283 (8d Cir. 1998), cert.

denied, 525 U.S. 1114 (1999) ............. sete a etree 19, 25

In re Rhone-Poulenc Rorer, Inc., 51 F.3d 1293

I eo a a andiaaasvasueeee Oe

In re TJX Companies Retail Security Breach

Litigation, 584 F.Supp. 2d 395 (D. Mass.

RE F220 iar ty cinseS dons ae ease sak sats ie come enie he cantons ties 20

TABLE OF AUTHORITIES — Continued

In re Washington Public Power Supply Sys.

Sec. Litig., 19 F.3d 1291 (9th Cir. 1994)................. 26

International Precious Metals Corp. v. Waters,

et al., 580 U.S. 1223 (2000)..............06. 5, 8, 12, 13, 22

Kenny A. v. Perdue, et al., 532 F.8d 1209 (11th

Cir. 2008), cert. granted, 129 8.Ct. 1907, 2009

LEXIS 2664, 77 U.S.L.W. 3557 (Apr. 6, 2009)

(Neo, CBT cocccscn tara dakehacevckenserss 38, 39, 40, 41

Kenny A. v. Perdue, et al., 547 F.3d 1319 (2008)

(Tjoflat, Dubina, Carnes, J.J. dissenting from

Genial OF FOF Gir MED assesestescescccccscccnccscceceeee 41, 42

Lyons v. Scitex Corp., 987 F.Supp. 271

(S.A, Fy Pee aiiakcacecocsccccsccvesccccccess 19

Masters v. Wilhelmina Model Agency, Inc., 473

FSG B28 Ce a aieieciassscarcscsesscccsscccccess 17

McLendon v. The Continental Group, Inc., et

al., 872 F. Supp. 142 (D.N.J. 1994)..............cceseevee00d0

Nensel v. Peoples Heritage Financial Group,

815 F. Supp. Ze Cay Meee Br cccccccc ssc vccsccccsccsscccccees 27

Parker v. Time Warner Entertainment Co., L.P,

et al., No. 98-cv-04265 (ILG) (JMA), 2009

U.S. Dist. LEXIS 57162 (July 6, 2009)................... 20

Pennsylvania v. Delaware Valley Citizens’

Council for Clean Air, et al., 478 U.S. 546

(DGG) occcccc pn cee eS eesasicevesssscssescesccccces 40

Pennsylvania v. Delaware Valley Citizens’

Council for Clean Air, et al., 483 U.S. 711

(LOST ) ccccacccvakeeeneeeenER UNG UC ania suatetctescesoscsocsccccceses 29

TABLE OF AUTHORITIES — Continued

Page

Reynolds v. Beneficial Nat'l Bank, 288 F.3d 277

Fee Gt ID Soro ccxxanshcdvncessdseidccuinedesareysaneuueanbonacecment 8

Strong v. BellSouth Telecomm. Inc., 137 F.3d

ee Cee ee ED ceocciessddcaccisscccdnssceoctubcncaies 13, 17, 18

Szabo v. Bridgeport Machines, Inc., 249 F.3d

a ee ts HED vic cciindatunnccesusatieasevicuactediccsantcnceuans 30

Torrist v. Tucson Electric Power Co., et al., 8

FA BOT Ce A, IED daceesdecexcccensonscccvucntucceavcccsce

Trief v. Dunn & Bradstreet Corp., 840 F. Supp.

Ee Ces Re ee catsicceeiciacescdeecssessdscnnans 27, 28, 29

Waters v. International Precious Metals Corp.,

et al., 190 F.3d 1291 (llth Cir. 1999), cert.

denied, 530 U.S. 1223 (2000)....................5, 8, 12, 13

Weinberger v. Great Northern Nekoosa Corp.,

801 F. Supp. 804 (D. Me. 1902).......sccccccscccscecsccessess 28

Williams v. MGM-Pathe Communications Co.,

129 F.3d 1026 (9th Cir. 1997) ............... 13, 16, 17, 18

Wise v. Popoff, 835 F. Supp. 977 (E.D. Mich.

UMIEEIT ick4scechsunuelsdssbiosapsedeuucocuadccuuaierserseae 18

STATUTES AND RULES

15 U.S.C. § 77z-1(a)(6), Private Securities Liti-

gation Reform Act of 1995 (PSLRA)................... 2,14

ay ae or re... es deaeuesduabeatepsinweceluumeianin 2

28 U.S.C. § 1712(a), Class Action Fairness Act

Oe MERI 8 oc su cucccuuunukiuuavacedesvumacnswoden sevnala a ae

TABLE OF AUTHORITIES — Continued

Page

29 U.S.C. § 216(b), Fair Labor Standards Act

3 REESE RRs aren nenan Sy een een pir ASM wae ane 2, 36

Federal Rules of Civil Procedure, Title IV, Rule

23, Class Actions (December 1, 2008) ..................0... 7

TREATISES AND OTHER AUTHORITIES

Coffee, John C., The Unfaithful Champion: The

Plaintiff as Monitor in Shareholder Litiga-

tion, Law & Contemp. Probl., 48 DUKE L. J. 3

RTE RELI SIE O RIL O LDN NRTR TE

Hirsh, Alan and Diane Sheehey, Awarding

Attorneys’ Fees and Managing Fee Litigation

49 (Fed. Jud. Center 1994) ............ cc cccccsesses eee eeeeees 25

Jones, Ashby, The Ford Rollover Litigation: The

Scoop on the Coupons, THE WALL STREET

JOURNAL, Aug. 3, 2009 (available 9/28/09 at

http://blogs. wsj.com/law/2009/08/03)..................00608. 4

Koniak, Susan P. and George M. Cohen, Jn Hell

There Will Be Lawyers without Clients or

Law, 30 HorstRA L. REv. 120 (2001)..........00.00.000..... 4

Priest, George L., Economics of Class Actions, 9

KAN. J. L. & Pup. Por’y 481 (No. 3, Spring

2000) ..... - ef ..d0

PETITION FOR WRIT OF CERTIORARI

Petitioner Marty Evans respectfully prays that a

writ of certiorari issue to review the judgment of the

United States Court of Appeals for the Ninth Circuit.

OPINIONS BELOW

The Ninth Circuit Court of Appeals’ initial Memo-

randum decision in Glass v. UBS Financial Services,

Inc., etc., Nos. 07-15278 and 07-15309, was entered on

February 9, 2009 (reprinted at Apps. 13-22), and

withdrawn on May 14, 2009 (reprinted at Apps. 11-

12). An amended Memorandum decision was filed on

May 14, 2009 (Glass, 2009 U.S. App. LEXIS 10328),

and is reprinted at Apps. 1-10. The Ninth Circuit’s

order denying Petitioner’s and one other objector’s

petitions for rehearing and for rehearing en banc was

filed on May 18, 2009, and is reprinted at Apps. 74-

76. All were unpublished.

The Ninth Circuit Court of Appeals’ Decision

affirmed the U.S. District Court for the Northern Dis-

trict of California’s Order Granting Joint Motion for

Final Approval; Judgment, filed January 26, 2007,

and the Order (1) Granting Joint Motion for Final

Approval of Settlement; (2) Granting Class Counsel's

Application for Attorney’s Fees, Costs and Class Rep-

resentative Enhancements, filed January 26, 2007.

The district court’s orders and judgment were not

officially reported but are reprinted at Apps. 23-30,

and 31-73, respectively.

STATEMENT OF JURISDICTION

The amended Memorandum decision of the Court

of Appeals for the Ninth Circuit was entered on May

14, 2009 (App. 1). Two petitions for rehearing and for

rehearing en banc, one of which was Petitioner’s,

were denied May 18, 2009 (App. 74). On August 7,

2009, Justice Kennedy granted Petitioner a 45-day

extension of time within which to file a Petition for

Writ of Certiorari to and including October 1, 2009.

Jurisdiction of this Court is invoked under 28 U.S.C.

§ 1254(1).

STATUTES AND RULES INVOLVED

1. 29 U.S.C. § 216(b), Fair Labor Standards Act

(FLSA):

The court in such action shall, in addi-

tion to any judgment awarded to the

plaintiff or plaintiffs, allow a reasonable

attorney’s fee to be paid by the defen-

dant, and cost of the action.

2. 15 U.S.C. § 77z-1(aX6), Private Securities

Litigation Reform Act of 1995 (PSLRA):

Total attorneys’ fees and expenses

awarded by the court to counsel for the

plaintiff class shall not exceed a rea-

sonable percentage of the amount of any

damages and prejudgment interest actu-

ally paid to the class.

3. 28 U.S.C. §1712(a), Class Action Fairness

Act of 2005 (CAFA):

[A]Jny attorney’s fee award to class

counsel that is attributable to the award

of the coupons shall be based on the

value to class members of the coupons

that are redeemed.

INTRODUCTION

It is in the interest of all the participants in

the class action — save the absent members

of the class — to settle class actions by

collusively transferring money from the class

to class counsel. As long as plaintiffs’ lawyers

are willing to act in a self-interested way,

they will be rewarded by defendants with

extraordinary fees funded at the expense of

the class. Courts will not effectively monitor

the abuse because of their interest in seeing

cases settled. ...

te * *

Our experience and the available evidence of

class action practice [combined with] our

understanding of the incentives built into the

present system sustains our conviction that

collusion and inadequate representation are

everyday features of the class action world —a

scandalous state of affairs.

Susan P. Koniak and George M. Cohen, In Hell There

Will Be Lawyers without Clients or Law, 30 HOFSTRA

L. REv. 120, 155 (2001) (emphasis added).

The issues upon which Supreme Court review is

sought all involve important federal questions con-

cerning how reasonable attorneys’ fees are calculated

in class actions. Each of the issues reflects a way in

which the plaintiffs’ class action bar, through an

accommodation with the defendants it sues, has

manipulated the structuring of class action settle-

ments to maximize its attorneys’ fees and reduce

class member recoveries. Lack of resolution of these

issues has resulted and will continue to result in

unwarranted and excessive attorneys’ fee awards’ to

plaintiffs’ class action lawyers in the millions, tens of

millions, and collectively hundreds of millions of

dollars.

There are three reasons why the Supreme Court

should grant this Petition.

' The latest class action attorneys’ fee abuse, which this

Petition seeks to prevent, involved California class action cover-

ing nearly a million class members. The class action lawyers

received a $25 million attorneys’ fee based upon a purported

$500 million settlement value. However, this value turned out to

be preposterous since only 75 people received $37,500 from the

settlement. See Ashby Jones, The Ford Rollover Litigation: The

Scoop on the Coupons, THE WALL STREET JOURNAL, Aug. 3, 2009

(available 9/28/09 at http://blogs.wsj.com/law/2009/08/03).

1. The issues raised regarding the awarding of

reasonable attorneys’ fees in class actions have

already been identified by federal courts of appeal

and district courts as being unresolved by this Court

and are causing confusion and conflict among the

circuits.

(a) Issue No. 1: The Honorable Sandra Day

O’Connor, Supreme Court Justice Ret., in Jnterna-

tional Precious Metals Corp. v. Waters, et al., 530 U.S.

1223 (2000) [hereinafter Waters], stated her opinion

that the question of whether, in awarding reasonable

attorneys’ fees from a common fund, federal courts

must consider the amount of money actually received

by class members, not merely the amount of money

theoretically made available to the class, was an issue

that deserved this Court’s attention.

(b) Issue No. l(a): This Court in Boeing

acknowledged that its decision did not address

attorneys’ fee awards in claims-made settlements.

Judge William Young of the District Court of Massa-

chusetts, in a thorough review of Issue No. l(a) (see

Apps. 77-107), acknowledged the conflicting judicial

opinions on this issue and comes out in favor of

Petitioner’s position, which is contrary to the holding

of the Ninth Circuit Court of Appeals.

ing in Dague, prohibiting enhancement of the lode-

star for contingent risk, applies when attorneys’ fees

are awarded from a common fund rather than pursu-

ant to a fee-shifting statute has been the subject of

conflicting holdings by district courts and circuit

courts of appeals throughout the country.

(d) Issue No. 2(a): This issue represents

the latest Darwinian adaption by the plaintiffs’ class

action bar to maximize their attorneys’ fees at the ex-

pense of class member recoveries by creating a Rube

Goldbergian settlement structure in which courts

have permitted attorneys’ fees to be calculated using

lodestar multipliers.

(e) Issue No. 3: The awarding of an attor-

neys’ fee of $11,250,000, including a 1,100 percent

lodestar enhancement, was justified based upon the

exceptional result and superior skill of Class Counsel.

The district court believed that the case was of

questionable merit in light of a Department of Labor

opinion letter published after the settlement was

reached, which determined that stockbrokers were

exempt under the FLSA, and that therefore both the

size of the settlement and Class Counsel’s legal skills

were exceptional.

2. Apart from the significance of these fee

issues from an attorneys’ fee jurisprudential perspec-

tive, as a practical matter every year that these

issues are not resolved, hundreds of millions of dol-

lars (and over an extended period of time billions of

dollars) of class member recoveries will continue to be

siphoned out of class action settlements to plaintiffs’

class action lawyers in the form of excessive attor-

neys’ fees, or to defendants in the form of settlement

reversions.

The importance of these issues is reflected in

the enormity of the attorneys’ fees now being awarded

in class actions. For example, in Enron’ a fee of $688

million fee was awarded to class counsel. The size of

the attorneys’ fee awards now generated by class ac-

tion settlements, which could not have been imagined

by the creators of Rule 23, underscores the urgency of

resolving the issues raised in this Petition.

3. Finally, this Court should grant this Petition

because class action issues, particularly attorneys’ fee

issues, do not regularly come before this Court. The

plaintiffs’ class action bar and defendants have skill-

fully developed techniques to ensure that such issues

are rarely exposed to Supreme Court review.

Because a large proportion of class actions

settle[ ] or [are] resolved in a way that over-

takes procedural matters, some fundamental

issues about class actions are poorly de-

veloped.... But, the more fundamental the

question and the greater the likelihood that

it will escape effective disposition at the end

of the case, the more appropriate is an

appeal....

Blair v. Equifax Check Services, Inc., 181 F.3d 832,

835 (7th Cir. 1999) (Easterbrook, J.).

* In re Enron Corporation Securities, Derivative & “ERISA”

Litigation, MDL No. 1446, Civ. No. H-01-3624 (con.) (S.D. Tex.,

Houston Div.) (Conclusions of Law, Findings of Fact, and Order

re Award of Attorneys’ Fees from Settlement Fund (Dkt. 6026),

filed 9/8/08).

It is unlikely this Court will get another

opportunity to review these issues in the near future.

For example, the issue not addressed in Boeing has

been left unresolved for nearly three decades; the dis-

pute regarding the implications of Dague on common

fund fee awards has now been unresolved for 17

years, and the issue raised by Waters has not been

addressed by the Court for nearly a decade. Unfortu-

nately (for class members), the plaintiffs’ class action

bar has successfully turned this Court’s failure to rule

on these issues into an invitation to request excessive

attorneys’ fees. Denial of certiorari will only serve to

perpetuate the practices that overcompensate plain-

tiffs’ class action lawyers. It should come as no surprise

therefore that Judge Richard Posner has observed that

“inflated attorneys’ fees are an endemic problem in

class action litigation....” Reynolds v. Beneficial

Nat'l Bank, 288 F.3d 277, 287 (7th Cir. 2002).

Fortunately, the necessity of immediate review of

these issues is matched by the unique suitability of

this case as a vehicle for addressing the questions

presented.

STATEMENT OF THE CASE

Petitioner seeks review of the Ninth Circuit’s

affirmance of a district court class action attorneys’

fee award of $11,250,000, calculated as a benchmark

25 percent of a maximum theoretical settlement val-

ue of $45 million. In actuality, Defendant distributed

only $21° million to class members. Using a lodestar

cross-check, the district court approved the fee, in-

cluding a multiplier “of at least ten,” based upon an

unknown lodestar.

The class consisted of over 10,000 stockbrokers

employed by Defendant UBS. The complaint alleged

that UBS improperly classified these employees as

exempt, in violation of the FLSA.

Petitioner Marty Evans is a UBS stockbroker

who objected to both the proposed settlement and the

attorneys’ fee request. The trial court approved the

settlement and attorneys’ fees as requested, and Ob-

jector’s appeal to the Ninth Circuit was unsuccessful.

The relevant facts of this case begin before June

30, 2006, the date of the district court’s filing of Glass

v. UBS Financial Services, Inc., No. C-06-04068

MMC, in the Northern District of California. Five

months earlier, on January 31, 2006, as part of the

mediation of another class action, the parties

negotiated the Glass settlement. The parties settled

the case before a complaint was even filed; there was

no active litigation — no motion practice (no motion

for class certification, no motion to dismiss, no motion

for summary judgment); no formal discovery (no

* $21,133,928.

* Glass v. UBS Financial Services, Inc., No. C-06-04068

MMC (N.D. Cal., San Francisco Div.), Hr’g Tr. 1/19/07 (Dkt. 238),

at 71:5-7.

interrogatories, no depositions, no requests for

production of documents), and no trial.

Class Counsel and Defendant structured the

settlement so that Defendant would not be obligated

to pay more than $45 million to settle the case and

class members could make claims against the Defen-

dant up to a maximum of $33 million.’ The parties

furthermore agreed that Class Counsel’s attorneys’

fee would be paid separately by the Defendant and

would be 25 percent of the maximum settlement pay-

ment, rendering a fee of $11,250,000. The settlement

provided that all unclaimed funds would revert to the

Defendant UBS, as well as any portion of the agreed

attorneys’ fee not awarded by the court. (App. 34).

In approving the fee request, the district court

justified a multiplier of at least 10 as follows:

The early settlement of the instant action

resulted in significant benefit to the class,

however. In light of the recent Opinion

Letter of the Department of Labor, issued

November 27, 2006, defendants likely would

not agree to as large a settlement, or indeed

any settlement, if the parties were attempt-

ing to negotiate a settlement today. Class

counsel expressly recognized the negative

impact an opinion letter could have on the

* The proposed settlement provided for a maximum

$45,000,000 settlement payment, from which attorneys’ fees and

litigation costs and incentive awards would be deducted. (See

App. 33).

instant litigation well before the November

27, 2006 Opinion Letter was issued. ( .

({N]oting “(t]he whole idea that stockbrokers

can recover for improper wage deductions or

sue for overtime is clearly a novel one .

[and] a new opinion letter could end this

genre as quickly as it did a few years ago

when the Department of Labor wrote that

insurance adjusters were exempt from over-

time”).) Class counsel achieved an excellent

result for the class members by settling the

instant action promptly.

* * *

Class counsel’s prompt action in negotiating

a settlement while the state of the law re-

mained uncertain should be fully rewarded.

(Apps. 68-69 (citation omitted; emphasis

added); App. 70).

REASONS FOR GRANTING THE WRIT

I. In Awarding Reasonable Attorneys’ Fees

in Class Actions, Courts Must Consider

the Amount of Money Actually Received

by Class Members

Issue No. 1.

Review is necessary to resolve the dispute among

the nation’s federal courts as to whether, in

determining a reasonable attorneys’ fee paid from

a common fund, it is permissible for a court to

calculate the fee as a percentage of the amount of

money theoretically made available to the class

without considering the amount of money

actually paid to class members?

Can reasonable attorneys’ fees in a class action

be calculated as a percentage of the amount of money

merely made available to class members, without

consideration of the amount of money actually paid to

class members? Both the trial court and the Ninth

Circuit Court of Appeals ruled that the fee should be

calculated as a percentage of the money being made

available to settle the case — $45 million rather than

the $21 million that was actually paid to class

members.

This precise issue was raised in a petition for

certiorari filed nearly a decade ago in Waters, supra.

In that case, the Honorable Sandra Day O’Connor,

Supreme Court Justice Ret., denied certiorari on

standing grounds.” Writing in support of Petitioner’s

position, however, she explained:

In Boeing v. Van Gemert, 444 U.S. 472

(1980), we upheld an award of attorney’s fees

in a class action where the award was based

on the total fund available to the class rather

than the amount actually recovered. Boeing,

444 U.S. at 480-481. We had no occasion in

Boeing, however, to address whether there

° Because the petitioning defendant had agreed, as a term

of the settlement, to the method of calculation of class counsel's

attorneys’ fee and had also agreed not to oppose class counsel’s

attorneys’ fee request

must at least be some rational connection

between the fee award and the amount of the

actual distribution to the class. The approval

of attorney’s fees absent any such inquiry

could have several troubling consequences.

Arrangements such as that at issue here

decouple class counsel’s financial incentives

from those of the class, increasing the risk

that the actual distribution will be misallo-

cated between attorney’s fees and the plain-

tiffs’ recovery. They potentially undermine

the underlying purposes of class actions by

providing defendants with a powerful means

to enticing class counsel to settle Jawsuits in

a manner detrimental to the class. And they

could encourage the filing of needless

lawsuits where, because the value of each

class member’s individual claim is small

compared to the transaction costs in obtain-

ing recovery, the actual distribution to the

class will inevitably be minimal. The Court

of Appeals have differed in their approaches

to the problem. Compare Strong v. BellSouth

Telecommunications, Inc., 137 F.3d 844, 852

(CA5 1998) (District Court did not abuse its

discretion in basing fee award on actual

payout rather than reversionary fund), with

Williams v. MGM-Pathe Communications

Co., 129 F.3d 1026, 1027 (CA9 1997) bench-

mark for fee award is 25% of entire fund, and

District Court abused its discretion in basing

award on actual distribution to class).

Waters, 530 U.S. at 1224 (emphasis added).

Petitioner believes, as Justice O’Connor indi-

cates, that the Court’s original holding in Boeing

should be reconsidered. This position is confirmed by

the fact that:

(i) Congress, in the Private Securities

Litigation Reform Act of 1995 (hereinafter PSLRA),

has mandated that the calculation of reasonable

attorneys’ fees in securities class actions must be

based upon the amount of money actually received by

the class.

Total attorneys’ fees and expenses awarded

by the court to counsel for the plaintiff class

shall not exceed a reasonable percentage of

the amount of any damages and prejudg-

ment interest actually paid to the class.

15 U.S.C. § 77z-1(a)(6); and,

(ii) Congress, in the Class Action Fairness

Act (hereinafter CAFA), again specifically legislated

in coupon class action settlements that attorneys’ fees

could not be calculated based upon the maximum

value of the coupons made available, but rather the

amount of coupons actually used by class members.

[AJny attorney’s fee award to class counsel

that is attributable to the award of the

coupons shall be based on the value to class

members of the coupons that are redeemed.

28 U.S.C. § 1712(a).

This Petition has been made necessary because of

a practice that class action lawyers use to game the

system and obtain excessive attorneys’ fees by trading

a higher fee from the defendant for an offsetting

lower payment to the class. In a reversionary settle-

ment, any amount not claimed by class members

reverts to the defendant. It works as follows: Assume

that the class action lawyers and defendant have

reached an understanding to settle the class action

for a payment by the defendant of $5 million. Out of

this sum, the lawyers seek a fee of 25 percent of the

recovery, or $1,250,000. By colluding with each other

at the class’s expense, both the class lawyers and the

defendant can improve their respective positions.

Instead of proposing a $5 million pro rata settlement,

the parties agree to a theoretical $10 million rever-

sionary settlement. This increases the lawyers’ antici-

pated 25 percent fee to $2,500,000, with the parties

expecting that defendant’s payment of claims will fall

below $3,750,000.

These machinations by plaintiffs’ counsel in class

actions — claiming excessive fees based on the purely

theoretical gross settlement values in reversionary

settlements — result in exorbitant plaintiffs’ counsel’s

fee awards, which are totally unconnected to any ben-

efit actually conferred upon the class. (See supra note

1, at 4). The district court (and the Ninth Circuit)

refused to consider the basic policy issues underlying

the PSLRA and CAFA.

The Ninth Circuit has held, however, that

the district court must award fees as a

percentage of the entire fund, or pursuant

to the lodestar method, not on the basis

of the amount of the fund actually claimed

by the class. See Williams v. MGM-Pathe

Communications Co., 129 F.3d 1026, 1027

(9th Cir. 1997). Contrary to Evans’ argu-

ment, the Court finds inapplicable the Class

Action Fairness Act’s provision that “any

attorney’s fee award to class counsel that is

attributable to the award of ... coupons

shall be based on the value to class members

of the coupons that are redeemed.” See 28

U.S.C. § 1712(a). That statute, on its face,

does not apply to non-coupon settlements.

(App. 70).

Only when class counsel’s fee is based on actual

class member distributions will the interests of class

counsel be aligned with those of their clients. Any

other outcome encourages the creation of further Ford

rollover embarrassments (see supra note 1, at 4) to

our legal system.

The district court, in support of its decision, cites

Williams v. MGM-Pathe Communications Co., 129 F.3d

1026 (9th Cir. 1997) (see App. 70), the Ninth Circuit

case that requires that district courts base their fee

awards on the nominal maximum settlement

amounts; district courts do not even have discretion

to base the fee on the amount actually distributed to

the class.

We conclude that the district court abused its

discretion by basing the fee on the class

members’ claims against the fund rather

than on a percentage of the entire fund or on

the lodestar.

Williams, 129 F.3d at 1027.

The Ninth Circuit opinion, although not specif-

ically mentioning Williams, states:

Further, the court’s calculation of 25% of the

total award, rather than 25% of the amount

actually collected by the class, was proper,

and was in line with Ninth Circuit prec-

edent. See |Hanlon v. Chrysler Corp., 150

F.3d 1011, 1029 (9th Cir. 1998)] (discussing

awards of 25% of the common fund as bench-

mark figure). (Apps. 8-9).

As Justice O’Connor noted, the Ninth Circuit”

decision directly conflicts with the decision of the

Fifth Circuit in Strong v. BellSouth Telecomm. Inc.,

137 F.3d 844 (5th Cir. 1998). In Strong, the Fifth

Circuit stated its view that Boeing was not con-

trolling because:

" However, Williams was not decided under the PSLRA.

* In Masters v. Wilhelmina Model Agency, Inc., 473 F.3d 423

(2d Cir. 2007), the district court had awarded attorneys’ fees as a

percentage of the claims made by the class, rather than a per-

centage of the gross settlement amount. The Second Circuit

reversed, citing Williams in support of its reversal. Wilhelmina

is not directly on point since the money not awarded to the class

did not revert to the defendant but rather was distributed by

way of cy pres.

(T]he absence of any fund and because the

value of the settlement was contingent on

class members’ desire to continue the plan as

well as their eligibility for the credit, we

reject the contention of plaintiffs’ counsel

that the district court abused its discretion

by not basing the attorneys’ fee award on the

$64 million ‘common find’ value.

Strong, 137 F.3d at 852, while the Williams court

reached its conclusion based upon a conflicting inter-

pretation of Boeing:

[T]he [Boeing] Court concluded that the

attorneys for a successful class may recover a

fee based on the entire common fund created

for the class, even if some class members

make no claims against the fund so that

money remains in it that otherwise would be

returned to the defendants.

Williams, 129 F.3d at 1027.

Numerous district courts throughout the country

have adopted Petitioner’s position:

In re Bolar Pharmaceutical Co. Sec. Litig.,

800 F.Supp. 1091, 1095 (E.D.N.Y. 1992)

(“ban on fee enhancement for contingency in

statutory fee-shifting cases extends. to

equitable fund cases”).

Wise v. Popoff, 835 F. Supp. 977, 981 (E.D.

Mich. 1993) (a legal fee fixed in relation to a

maximum available fund rather than bene-

fits actually realized is not a desirable gen-

eral rule).

Duhaime v. John Hancock Mut. Life Ins. Co.,

989 F. Supp. 375, 380 (D. Mass. 1997) (fee

award should be proportionate to the actual

value created for the class).

Lyons v. Scitex Corp., 987 F. Supp. 271, 279

(S.D.N.Y. 1997) (before awarding fees, the

court must determine what portion of the

settlement fund will actually be paid to

plaintiffs).

In re Prudential Ins. Co. of Am. Sales Prac-

tice Litig., 148 F.3d 283, 337 n.116 (3d Cir.

1998), cert. denied, 525 U.S. 1114 (1999)

(the benefits actually received and used by

plaintiffs will be critical in determining the

amount of a reasonable fee award).

In re Compact Disc Minimum Advertised

Price Antitrust Litig., 292 F. Supp. 2d 184,

190 (D. Me. 2003) (“I have determined to

delay [the] award of attorney fees until

experience shows how many vouchers are

exercised and thus how valuable the

settlement really is.”).

At stake in this dispute is literally hundreds of

millions of dollars in attorneys’ fees to be paid to class

action lawyers or kept by defendants, which would

otherwise be used to reimburse class members for

their losses. It is important that this Court establish

uniform guidelines regarding the proper relationship

between class counsel’s fees and actual distributions

to class members. There is no reason to limit this

methodology to securities and coupon class action

settlements.

II. Boeing Should Not Be Extended to Claims-

Made Class Action Settlements

Issue No. l(a).

If the answer to Issue No. 1 is yes, is it also

permissible (to base the fee on the amount made

available) when class members are paid directly

by the defendant on a claims-made basis, not

from a common fund? [The circumstance left

unresolved in Boeing v. Van Gemert, 444 U.S. 472

(1980)].

If this Court does not reconsider Boeing, it should

ensure that Boeing is not extended to claims-made

settlements.

Recently, a thorough review and analysis of the

issues surrounding this question was authored by the

Honorable William C. Young of the United States

District Court for the District of Massachusetts.” The

full opinion is included at Apps. 77-107, In re TJX

Companies Retail Security Breach Litigation, 584

F. Supp. 2d 395 (D. Mass. 2008). Judge Young agrees

with Petitioner’s position that the proper calculation

of class counsel’s fee in claims-made settlements like

this one should be based upon the money actually

received by the class.

° Judge Young’s analysis was most recently adopted by the

Honorable I. Leo Glasser, Senior District Judge for the Eastern

District of New York, in Parker v. Time Warner Entertainment

Co., L.P, et al., No. 98-cv-04265 (ILG) (JMA), 2009 U.S. Dist.

LEXIS 57162 (July 6, 2009), at *2-*70.

Judge Young notes at the outset:

Indeed, the Supreme Court in Boeing ex-

pressly refrained from ruling on the question

of whether its decision was applicable to

circumstances in which a class action judg-

ment did not create a common fund but

rather required a defendant “to give security

against all potential claims.” 444 U.S. at 480

n.5. (Apps. 89-90).

He goes on to observe that:

There was no common fund created....

(Apps. at 90).

According to class counsel, the litigation pro-

duced over $200,000,000 in benefits for the

class.... [Hlowever, class members had

claimed just over $6,100,000 in benefits. . .

(Apps. 86 and 86-87).

Judge Young, in describing the class action

mechanism as “broken” (App. 98), gives his reasons in

support of calculating the fee as a percentage of the

amount of money actually paid to the class:

[T]he valuation of benefits created by [the]

litigation [were] “illusory.” (App. 90).

[OJ]nly a fraction of any given class is likely

to claim the benefits provided for in a settle-

ment.... [A]ttorneys for each side bargain

knowing that this is true. (Apps. 93 and 95).

“(T]he proportionality of the fee to the relief

actually accruing to the class is an... . impor-

tant consideration in assessing the reason-

ableness of the fee award.” (App. 91; citation

omitted).

At bottom, class action litigation should

benefit the individuals who have been

harmed.... [The parties should _ be

encouraged] to adopt mechanisms that lend

themselves toward getting benefits to the

consumer. (Apps. 97 and 92).

This approach will not only encourage more

realistic settlement negotiations and agree-

ments, but also will drive class counsel to

devise ways to improve how class action

suits and settlements operate. (App. 98).

Linking attorneys’ fees to claims serves

two additional objectives. First, it prevents

“windfalls” for attorneys created by “class

apathy.” ... [T]he failure to link fees to

benefits claimed thus “could encourage the

filing of meedless lawsuits.” (Apps. 87

(citation omitted) and 100, citing Justice

O’Connor in International Precious Metals

Corp., 530 U.S. at 1223).

This Petition addresses the question left pending

in Boeing:

Nothing in the court’s order made Boeing’s

hability for this amount contingent upon the

presentation of individual claims. Thus, we

need not decide whether a class-action judg-

ment that simply requires the defendant to

give security against all potential claims

would support a recovery of attorney’s fees

under the common-fund doctrine.

Boeing, 444 U.S. at 481 n.5, since the settlement

hereunder review was structured so that the Defen-

dant deposited no money into a fund in the court for

class members. Rather, the Defendant agreed to pay

from its own resources valid class member claims up

to a maximum of $33 million. Adopting Judge Young’s

approach would protect district courts from unwitting

involvement in settlements that do more to benefit

plaintiffs’ counsel and defendants than they do to

compensate injured class members.

Iii. The Dague Prohibition against Enhance-

ment for Contingent Risk Should Apply

When Determining a Reasonable Attorneys’

Fee under Both Statutory Fee-Shifting

and Common Fund Principles

Issue No. 2.

Review is necessary to resolve the dispute among

the nation’s federal courts as to whether, in

determining a reasonable attorneys’ fee in a class

action, it is permissible for a court to avoid this

Court’s holding in City of Burlington v. Dague,

505 U.S. 557 (1992) [hereinafter Dague], pro-

hibiting enhancement for contingent risk by

calculating the fee using common fund prin-

ciples? [In other words, does the prohibition in

Dague only apply when attorneys’ fees are

calculated pursuant to a fee-shifting statute?]

In City of Burlington v. Dague, 502 U.S. 1071

(1992), at 1071, this Court granted review of the

following question:

May a court, in determining a reasonable

attorney's fee award under [a fee-shifting

statute], enhance the fee award above the

lodestar amount in order to reflect the fact

that the attorneys had taken the case on a

contingent-fee basis, thus assuming the risk

of receiving no attorney’s fees at all?

This Court answered the question as follows:

[W]e hold that enhancement for contingency

is not permitted under the fee-shifting

statutes at issue. We reverse the Court of

Appeals’ judgment insofar as it affirmed the

25% enhancement of the lodestar.

Dague, 505 U.S. at 567.

This Petition raises the question not yet ad-

dressed by this Court of whether federal courts can

avoid the Dague prohibition in class actions brought

under statutes with fee-shifting provisions by award-

ing attorneys’ fees using common fund principles.

Since this Court’s decision in Dague, controversy

has reigned among district courts and courts of

appeal throughout the country as to whether the

Dague prohibition against enhancement for contin-

gent risk is limited to cases in which reasonable

attorneys’ fees are awarded under fee-shifting prin-

ciples or whether it applies to reasonable attorneys’

fees calculated from common fund recoveries as well.

The Supreme Court has not yet decided

whether its decision in Dague precluding

the use of a multiplier in consideration of

risk taken when calculating fees under the

lodestar method applies in common fund

cases....

Brytus v. Spang & Co., 203 F.3d 238, 243 (3d Cir.

2000) (citations omitted; emphasis added).

Although the Supreme Court has not ad-

dressed whether this prohibition also applies

in common fund cases, the district court

found “the Court’s reasoning for excluding

risk enhancements in _ fee-shifting cases

applies equally to common fund cases.” In

addition, the court also took notice that juris-

dictions are split as to the application of risk

enhancements in the common fund context.

In re Prudential Ins. Co. of America Sales Practices

Litig., 148 F.3d at 341 (emphasis added).

Petitioner asks this Court to clarify its Dague

holding on this point. The Federal Judicial Center”

has noted the various contending judicial positions on

° For a general discussion of conflicting circuit and district

court interpretations of Dague, see Alan Hirsh and Diane

Sheehey, Awarding Attorneys’ Fees and Managing Fee Litigation

49, 70-71 (Fed. Jud. Center 1994).

whether the Dague prohibition extends to a

determination of reasonable attorneys’ fees under

common fund principles as well.

The Ninth Circuit stated in Jn re Washington

Public Power Supply Sys. Sec. Litig., 19 F.3d 1291

(9th Cir. 1994):

The concerns that drove the Court to reject

contingency enhancements in the statutory

fee context apply with much less force in

common fund cases. Unlike statutory fee-

shifting cases where the winner’s attorneys’

fees are paid by the losing party, attorneys’

fees in common fund cases are not paid by

the losing defendant, but by members of the

plaintiff class... .

* * 4

The bar against risk multipliers in statutory

fee cases does not apply to common fund

cases.

Id. at 1299-1300, as did the Seventh Circuit in Florin

v. NationsBank of Georgia, N.A., 34 F.3d 560, 564

(7th Cir. 1994):

In any event, we conclude that the holding in

Dague should not extend to this case. As we

have explained, 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. Dague, by its terms, applies only to

statutory fee-shifting cases, and its reason-

ing is largely based on the statutory lan-

guage of fee-shifting provisions.

But see In re General Motors Corp. Pick-Up Truck

Fuel Tank Prod. Liab. Litig., 55 F.3d 768, 822 (3d Cir.

1995) (“to the extent that the district court relied on

the lodestar method, it erred by applying a multiplier

... [t]he Supreme Court ... has rejected the use of

multipliers to enhance the lodestar’s hourly rate

amount”) (applied to de facto common fund); and Jn re

Nineteen Appeals Arising Out of San Juan Dupont

Plaza Hotel Fire Litig., 982 F.2d 603, 619 (1st Cir.

1992) (Lay, J., concurring) (“I can discern no logical

distinction between an equitable fund case and a fee-

shifting case that would cause these |Dague’s] rea-

sons to be worthwhile in [fee-shifting but not in] an

equitable fund case.”).

Numerous federal district courts throughout the

country have adopted Petilioner’s position that this

Court’s decision in Dague to prohibit enhancement of

the lodestar for contingent risk also applies to cases

where reasonable attorneys’ fees are paid from a com-

mon fund:

Nensel v. Peoples Heritage Financial Group,

815 F. Supp. 26, 28 (D. Me. 1993) (“[T]he

Court can see little, if any, basis to distin-

guish in the application of the holding in

Dague between fee shifting and common

fund cases.”).

Trief v. Dunn & Bradstreet Corp., 840 F. Supp.

277, 284-85 (S.D.N.Y. 1993) (“The language

of the [Dague] opinion, however, strongly

suggests that the Court’s holding is applic-

able to common fund cases... .”).

In re Prudential Ins. Co., 962 F. Supp. 572,

581 n.24 (D.N.J. 1997) (“(T]he Court’s

reasoning [in Dague] for excluding risk en-

hancements in fee-shifting cases applies

equally to common fund cases.”).

These courts have found that the concerns which

this Court expressed in Dague as reasons to prohibit

contingency risk in fee-shifting cases apply as well to

fee calculations in common fund cases.

Each consideration enunciated by the City of

Burlington court declining to permit en-

hancement of the lodestar is equally relevant

to the question of whether the lodestar

should be enhanced in this case.... [I]ts

applicability is not limited to the context of

federal fee-shifting statutes.

Trief v. Dunn & Bradstreet Corp., 840 F. Supp. at 284-

85. Accord, Weinberger v. Great Northern Nekoosa

Corp., 801 F.Supp. 804, 825 n.59 (D. Me. 1992)

(“The Dague court’s policy rationales in denying a

contingency-based multiplicr seems to be equally

applicable [to common funds].”).

Dague proscribed the use of contingent risk

multipliers to enhance the lodestar for the following

reasons:

1. Enhancement for contingency risk “would

likely duplicate ... factors already subsumed in the

lodestar.” Dague, 505 U.S. at 562.

2. Enhancement for contingency risk “would

encourage meritorious claims to be brought, but only

at the social cost of indiscriminately encouraging non-

meritorious claims to be brought as well. We think

that an unlikely objective of the ‘reasonable fees’

provisions.” Dague, 505 U.S. at 563.

3. Enhancement for contingency risk to

attempt “to mimic the intricacies of the fee-paying

market in every respect [is neither necessary nor

even possible].” Dague, 505 U.S. at 566-67.

4. Enhancement for contingency risk, under

the conditions set forth in Delaware Valley IT (Penn-

sylvuania v. Delaware Valley Citizens’ Council for

Clean Air, et al., 483 U.S. 711 (1987)], cannot “be in-

telligibly applied.” Dague, 505 U.S. at 563.

5. Enhancement for contingency risk re-

quires that a defendant “would in effect pay for the

attorney’s time (or anticipated time) in cases where

his client does not prevail.” Dague, 505 U.S. at 565.

6. Enhancement for contingency risk “would

make the setting of fees more complex and arbitrary,

hence more unpredictable. ...” Dague, 505 U.S. at

566.

Class actions, by their nature, have a sig-

nificantly greater potential to result in settlements

irrespective of the merits of the case than any other

form of litigation.

First, the class certification turns a $200,000

dispute ... into a $200 million dispute. Such

a claim puts a bet-your-company decision to

Bridgeport’s managers and may induce a

substantial settlement, even if the customers’

position is weak.

Szabo v. Bridgeport Machines, Inc., 249 F.3d 672, 675

(7th Cir. 2001) (emphasis added).

As noted by Judge Posner in Jn re Rhone-Poulenc

Rorer, Inc., 51 F.3d 1293, 1299 (7th Cir. 1995), class

actions produce what have been described as “black-

mail” settlements, i.e., settlements that rational busi-

ness judgment requires defendants settle, “even if

they have no legal liability.”

Judge Friendly, who was not given to hyper-

bole, called settlements induced by a small

probability of an immense judgment in a

class action “blackmail settlements.”

Id. at 1298. See also George L. Priest, Economics of

Class Actions, 9 KAN. J. L. & PuB. POL’y 481, 482 (No.

3, Spring 2000):

But, where damages are a substantial issue,

the combination of the expansion of liability,

the uncertainty of the process, and the way

our class action procedures are devised,

almost always leads to automatic settlement

or guaranteed settlement once a class action

is certified.

Furthermore, allowing two radically different fee

outcomes, based upon whether class counsel seek

attorneys’ fees under a fee-shifting statute as opposed

to seeking them from a common fund, has numerous

additional deleterious effects.

1. It frustrates the intent of Congress. In

establishing fee-shifting statutes, Congress sought to

encourage lawyers to undertake specific types of

litigation that it deemed to be socially beneficial.

However, to pay lawyers more (indeed, nearly ten

times their fees for identical work), when reasonable

attorneys’ fees are paid from a common fund as

opposed to fees paid by a defendant under a fee-

shifting provision, serves as a disincentive to lawyers

to litigate what Congress believed were socially

beneficial claims.

In point of fact, both the class action

mechanism and fee-shifting provisions were instituted

to encourage public interest litigation. If a court is

asked to determine a reasonable fee, there is no

justification of having a radically different fee

enriching experience for lawyers where both types of

litigation were enacted by Congress to serve the

public good.

2. To fail to extend the Dague prohibition

against risk multipliers to common fund recoveries

compromises the lawyers’ fiduciary responsibility to

maximize the class’s recovery and_incentivizes

counsel to place their own financial interests ahead of

the interests of the class.

The conflict of interest issue in litigation

commenced under fee-shifting statutes and settled

with the creation of a common fund is clear:

In a case such as this one, however,

had plaintiffs prevailed at trial, it is

entirely possible that defendants,

rather than the common fund,

would have been liable for attorney’s

fees under ERISA, 29 U.S.C.A.

§ 1132(g)(1). For the court to award

plaintiffs’ counsel a percentage of

the settlement when he might only

have been entitled to an hourly —

and therefore possibly lower — fee

had he obtained a favorable judg-

ment, would raise the specter of a

significant conflict of interest between

counsel and the absent class

members in the negotiation of such

a settlement.

Bowen v. South Trust, 760 F. Supp. 889, 896 (M.D.

Ala. 1991) (footnotes omitted).

See also Brytus v. Spang & Co., 203 F.3d 238 (3d

Cir. 2000), regarding the problem of the disparity of

different methods of calculating reasonable attorneys’

fees under the aforementioned circumstance.

Of course, there remains the possibility that

in some cases counsel for a class of plaintiffs

may receive a higher fee award upon settle-

ment than they would have received had the

case proceeded to judgment.

Id. at 247, and McLendon v. The Continental Group,

Inc., et al., 872 F. Supp. 142 (D.N.J. 1994):

The Master’ concludes that the Dague re-

striction must apply to any common fund

case that started as a fee-shifting case. He

reasons that since Dague clearly prohibits

any risk enhancement of lodestar amounts in

statutory fee cases, then allowing such en-

hancement in such cases that settle for a

lump sum would improperly encourage

plaintiff attorneys to settle for lump sums in

hopes of obtaining a risk enhancement that

would not otherwise be available. Thus, the

Master predicts that the Supreme Court

would prohibit risk enhancement of the

lodestar amount even if the award came from

a common fund derived from a fee-shifting

case.... In essence, the Master contends

that if different rules apply to attorneys’ fees

once a fee-shifting case settles, then a

conflict of interest inevitably would arise

between plaintiffs and their attorneys as to

the course of the litigation.

Id. at 154 (footnote and citation omitted; emphasis

added) (highlighting the controversy over these

issues, Judge Sarokin overruled the Special Master’s

finding).

’ Referring to Special Master Yale Law School Professor

George L. Priest.

This Court, in Amchem Prod., Inc. v. Windsor,

521 U.S. 591, 621 (1997), noted the problem where

class counsel were “confined to settlement negotia-

tions [and] could not use the threat of litigation to

press for a better settlement.” In such circumstances,

class counsel were compromised in their ability to

represent the class’s interest.

Class counsel should never be placed in the

position of being able to engineer higher compensa-

tion for themselves by settling cases on terms which

optimize their own recovery when all their thoughts

should be directed towards maximizing the class’s

recovery. Society should not be placed in a position

where its plaintiffs’ bar receives a ten-times greater

legal fee for settling a case of questionable merit than

it receives for litigating a case to a successful deter-

mination on its merit. Allowing lawyers’ self-interest

to intrude into their obligation to maximize the class’s

recovery will only further weaken public confidence in

the legal profession.

In the case at bar, the class action lawsuit was

filed under the FLSA, which provides for an award of

reasonable attorneys’ fees similar to the provisions of

the federal environmental statutes at issue in Dague.

If this case had gone to trial and a verdict favorable

to the plaintiffs were returned, Dague would control,

and the fee awarded would be based on the lodestar,

1.e., at least one-tenth of the fee awarded!

The Ninth Circuit’s affirmance of the district

court’s 25 percent benchmark incorporates a contin-

gent risk component:

There are no special circumstances here

which indicate that the 25% benchmark

award is either too small or too large....

Class counsel ... have the case on a con-

tingency.

Torrist v. Tucson Electric Power Co., et al., 8 F.3d

1370, 1376 (9th Cir. 1993), was based upon the

Department of Labor’s opinion letter. The district

court was, in essence, saying that had the litigation

continued, there was a high risk that the class would

have gotten significantly less or nothing if settlement

had not been reached prior to publication of the

Department’s opinion.

IV. Common Fund Principles Only Apply

When Calculating a Reasonable Attorneys’

Fee Paid from a Class Common Fund Re-

covery

Issue No. 2(a).

If the answer to Issue No. 2 is yes, is it

permissible to apply common fund principles

when, as the instant settlement provides, (i) the

attorneys’ fee is not paid from a common fund but

is paid separately by the defendant (as in fee

shifting), and (ii) any court reduction in the

requested attorneys’ fee benefits the defendant,

not class members (as in fee shifting)?

This class action settlement is symptomatic of a

rapidly growing practice in federal courts throughout

the nation in which plaintiffs’ class counsel betray the

interests of their clients to secure excessive fees for

themselves. The scheme, as is currently being

practiced, diverts hundreds of millions of dollars from

plaintiffs’ recoveries to class counsel or defendants.

The essence of the scheme involves an accommo-

dation with the defendants to manipulate the settle-

ment structure to increase attorneys’ fees and reduce

defendant’s distribution to class members and avoid

this Court’s decision in Dague.

The practice operates as follows: Plaintiffs’

counsel file a class action lawsuit under a statute

which provides for fee shifting — in the instant case

the FLSA, 29 U.S.C. § 216(b). Plaintiffs’ counsel seek

to maximize their fee while defendants’ counsel are

obligated to minimize the cost of the settlement to

their clients, so class counsel and the defendants

agree to settle the case by negotiating the amount to

be paid to the class, as well as a separate attorneys’

fee payment by the defendants to the class attorneys.

Class counsel nonetheless ask the court to approve

their fee request under common fund principles.

Seeking fees under the common fund doctrine allows

plaintiffs’ lawyers to do an end run around Dague’s

prohibition against contingent risk enhancement. The

fee request is a percentage of the _ theoretical

maximum payment by the defendant; but, since it is

not paid from a common fund if the fee is reduced,

even by the actions of a class member objecting, a fee

reduction inures to the benefit of the defendant.

Although this practice mimics fee shifting and

Dague should apply, the parties convince the court to

do otherwise. As the district court’s order notes:

“UInder the ‘common fund’ doctrine... .””

(App. 65).

When reasonable attorneys’ fees are awarded in

connection with a case brought under a fee-shifting

statute and fees are paid separately by the defen-

dants, fee-shifting principles are involved, not com-

mon fund principles.

[A] litigant or a lawyer who recovers a com-

mon fund for the benefit of persons other

than himself or his client is entitled to a

reasonable attorneys’ fee from the fund as a

whole.

Boeing Co. v. Van Gemert, 444 U.S. at 478.

This scheme also creates the very problem that

this Court sought to avoid in Evans v. Jeff D., 475

? It is, as a result of these kinds of rulings, that Professor

John Coffee has observed:

Yet, to some extent, the wool can be pulled over the

court’s eyes if the parties negotiate an agreement un-

der which legal fees will be paid separately by the

defendant.

John C. Coffee, The Unfaithful Champion: The Plaintiff as

Monitor in Shareholder Litigation, Law & Contemp. Probl., 48

DuKE L. J. 3 (Summer 1985), at 71 n.102.

U.S. 717 (1986). The settling defendant can no longer

place on the table the maximum amount of money

available to settle the litigation because attorneys’

fees do not come out of the total settlement payment.

Rather, a defendant who has no interest in how

settlement funds are allocated between class counsel

and the class is required to negotiate just such an

allocation. One need not be a cynic to assume that the

defendant will make that allocation in a manner that

assures that class counsel’s fee demand will be

satisfied in order to ensure litigation peace.

V. Neither an Upward Percentage Adjustment

nor an Enhancement of the Lodestar Can

Be Based on the Fact that the Lawsuit’s

Claims Appeared to Be without Merit

Issue No. 3.

If the answers to Issue Nos. 2 and 2(a) are yes,

can a court apply the “exceptional result/superior

performance” factors to support an upward

adjustment of the fee percentage, or a positive

enhancement of the lodestar in a cross-check,

based upon a finding that the class’s claim was of

questionable merit? (Petitioner believes this

issue is currently pending before this Court in

Kenny A. v. Perdue, et al., 532 F.3d 1209 (11th

Cir. 2008), cert. granted, 129 S.Ct. 1907, 2009

LEXIS 2664, 77 U.S.L.W. 3557 (Apr. 6, 2009) (No.

08-970) [hereinafter Perdue].)

App. 1

NOT FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

JOSEPH GLASS; DANTE No. 07-15278

DIFRANCESCO; RALPH D.C. No

CARBONE; DAVID CR On ’

BACHRACH, individually slinciitaninsicniaciuin

and on behalf of all others MEMORANDUM*

similarly situated, (Filed May 14, 2009)

Plaintiffs-Appellees,

UBS FINANCIAL SERVICES,

INC., a corporation; UBS

PAINE WEBBER, a

corporation; PAINE WEBBER

GROUP, INC., a corporation,

Defendants-Appellees,

ANTHONY D’ARIA,

Plaintiff-intervenor-

Appellant.

* This disposition is not appropriate for publication and is

not precedent except as provided by 9th Cir. R. 36-3.

App. 2

JOSEPH GLASS; DANTE

DIFRANCESCO; RALPH

CARBONE; DAVID

BACHRACH, individually

and on behalf of all others

similarly situated,

Plaintiffs,

and

MARTY EVANS,

Plaintiff-Appellant,

UBS FINANCIAL SERVICES,

INC., a corporation; UBS

PAINE WEBBER, a

corporation; PAINE WEBBER

GROUP, INC., a corporation,

Defendants-Appellees,

¥.

ANTHONY D’ARIA,

Plaintiff-intervenor.

No. 07-15309

D.C. No.

CV-06-04068-MMC

Appeal from the United States District Court

for the Northern District of California

Maxine M. Chesney, District Judge, Presiding

Argued and Submitted January 14, 2009

San Francisco, California

App. 3

Before: FARRIS, NOONAN and McKEOWN, Circuit

Judges.

This dispute arises from the district court’s ap-

proval of a class action settlement between the

named plaintiffs and the defendant, UBS Financial

Services. On appeal, plaintiff-objector Marty Evans

raises several objections to the district court’s deter-

mination that the settlement was fair, reasonable,

and adequate as required by Fed. R. Civ. P. 23(e).

Appellant Anthony D’Aria objects to the district

court’s denial of his motion to intervene in the case on

the grounds that it was untimely. The parties are

familiar with the facts.

I. Pending motions

We grant UBS’s motion to strike documents from

D’Aria’s excerpts of record which were submitted to

the district court after the final approval of the

settlement. See Kirshner v. Uniden Corp. of Am., 842

F.2d 1074, 1077-78 (9th Cir. 1988). We also grant

UBS’s motion for judicial notice of the Bowman dec-

laration.

II. Evans’s Claims

Evans argues, on several grounds, that the dis-

trict court abused its discretion in determining that

the settlement was fundamentally “fair, reasonable,

and adequate,” as required by the Federal Rules of

Civil Procedure. Fed. R. Civ. P. 23(e). “The district

App. 4

court’s decision to approve or reject a settlement is

committed to the sound discretion of the trial judge

because he is exposed to the litigants, and their

strategies, positions, and proof.” Jn re Mego Financial

Corp. Securities Litigation, 213 F.3d 454, 458 (9th Cir.

2000) (internal citations omitted). Each of Evans’

arguments is addressed below.

First, Evans argues that because the named

plaintiffs are all former employees of defendants, they

cannot fairly and adequately represent a class that

includes both current and former UBS employees. ER

474. A class action may be maintained only if “the

representative parties will fairly and adequately pro-

tect the interest of the class.” Fed. R. Civ. P. 23(a)(4).

The present settlement aims to provide compensation

for unlawful practices occurring during the class

period. For that period, “both the former and current

employees are equally interested in obtaining com-

pensation for the assertedly unlawful practices set

forth in the complaint.” ER 475.' Therefore, the dis-

trict court did not abuse its discretion in finding that

the class-representatives adequately represented the

interests of the class. See Cummings v. Connell, 316

F.3d 886, 896 (9th Cir. 2003) (“this circuit does not

favor denial of class certification on the basis of spec-

ulative conflicts’).

As the district court noted, the settlement does not pre-

clude any class member from filing suit against UBS for viola-

tion of the law occurring outside of the class period. ER 475.

App. 5

Second, Evans argues that the court violated the

rights of class members from states other than New

York, Pennsylvania, and New Jersey by approving a

plan of allocation that distributes a greater propor-

tion of the settlement funds to class members in those

states. ER 63. The Special Master and the district

court found that the parties had set forth a reasoned

basis for treating claimants employed in these three

states differently from claimants in other jurisdic-

tions. ER 479; see also, JSER 197 (Special Master’s

report concluding that the disproportionate allocation

was justified by differences among the states re-

garding “the definition of employees; the definition of

wages; various exemptions; varieties of allowed or

disallowed deductions from employee compensation;

elements of the causes of action available in various

states; and variances in the recoveries of the debt,

interest, attorneys’ fees, costs and penalties”). On

appeal, Evans does not address the substance of the

parties’ or the court’s reasoning, nor does he address

the differences in law between the states at issue.

Moreover, the fact that one of the named plaintiffs

was a class member from a state other than New

York, New Jersey, and Pennsylvania, undermines

Evans’s allegations of inadequate representation. ER

461, n. 1. Therefore, the district court did not abuse

its discretion in rejecting Evans’s objection to the plan

of allocation.

Third, Evans argues that the district court erred

in appointing a Special Master, pursuant to Rule 53

of the Federal Rules of Civil Procedure, without first

App. 6

obtaining consent from Evans. ER 476; Fed. R. Civ. P.

53. Rule 53(a) permits the appointment of a Special

Master for, among other things, the “perform[ance of]

duties consented to by the parties,” or without

consent when appointment is warranted by “the need

to perform an accounting or resolve a difficult compu-

tation of damages.” See Fed. R. Civ. P. 53(a)(1)(A)-

(C). In this case the named plaintiffs representing the

class and the defendant together requested the

appointment of the Master to address the parties’

damages analysis. This is sufficient to justify the

appointment of a special Master.

Fourth, Evans challenges a provision in the

settlement stating that any reduction in attorneys’

fees by the court will revert to the defendant, rather

than to the class. ER 63-64. We agree that the rever-

sion clause, as pertaining to attorneys’ fees, is prob-

lematic because it acts as a device to isolate fees from

scrutiny. See Staton v. Boeing Co., 327 F.3d 938, 964-

965, 970-71 (9th Cir. 2003). In addition to being

* While clauses mandating the reversion of unclaimed funds

may be common, appellees cite to no cases approving a settle-

ment with a reversion clause for attorneys’ fees. See UBS Brief

at 101-02. In fact, the Ninth Circuit in Staton stated that ordi-

narily, “after the court determines the reasonable amount of

attorneys’ fees, all the remaining value of the fund belongs to the

class rather than reverting to the defendant.” 327 F.3d at 971. A

reversion clause for attorneys’ fees is problematic because it

removes an important economic incentive that class members

may have in challenging a fee award that may be excessive

under the circumstances. The clause also gives the district court

one less reason to challenge an award of attorneys’ fees where

(Continued on following page)

App. 7

favorable to class counsel, the reversion clause is

favorable to UBS, which will receive the ultimate

benefit of any reduction by the court. Because the

reversion clause creates incentives for the negotiating

parties to make the attorneys’ fees a larger per-

centage of the total recovery, the district court is

required to “ensure that the class members’ interest

were not compromised in favor of those of class

counsel.” See Staton, 327 F.3d at 964-65.

Here, the district court found that the class mem-

bers obtained exceptional results for the class. ER

483-84. Notably, the class representatives were able

to negotiate the settlement before the Department of

Labor issued an Opinion Letter that would have

reduced the value of plaintiffs’ claims. See ER 465;

483-84. The court also acknowledged evidence of

additional value in the settlement in the form of

forward-looking relief. See ER 475, n.7; JSER 114-15.

The fact that class counsel achieved such timely

results for the class suggest that the class’s interests

were not compromised by the reversion clause, and

that the district court did not abuse its discretion in

finding that the settlement was fair and adequate.

Finally, Evans argues that the court’s approval of

an attorneys’ fees award consisting of 25% of the total

any reduction would only benefit the defendant, who may have

all but admitted to significant violations of the law. See Staton,

327 F.3d at 970 (rejecting a condition that would “inhibit district

courts from engaging in independent determinations of rea-

sonable fees”)

App. 8

award constitutes an abuse of discretion. While we

agree that the court’s award of attorneys’ fees is high

relative to the total class recovery, the question

on appeal “is not whether the district court should

have applied some other percentage, but whether

in arriving at its percentage it considered all the

circumstances of the case and reached a reasonable

percentage.” Vizcaino v. Microsoft Corp., 290 F.3d

1043, 1048 (9th Cir. 2002) (emphasis added). In re-

viewing the award of attorneys’ fees, the district court

properly performed an informal lodestar cross-check,

and noted the relatively low time-commitment by

plaintiff’s counsel. See Hearing Transcript of January

19, 2007 (Dkt. 238); ER 483; Six Mexican Workers uv.

Arizona Citrus Growers, 904 F.2d 1301, 1311 (9th Cir.

1990) (suggesting a lodestar cross-check and adjust-

ment in special circumstances when “the percentage

recovery would be either too small or too large in light

of the hours devoted to the case or other relevant

factors”). Having acknowledged that the lodestar fac-

tors weigh against a substantial award, the district

court did not abuse its discretion in giving weight

to other factors, such as the results achieved for

the class and the favorable timing of the settlement.

See Vizcaino, 290 F.3d at 1047-50. Under these cir-

cumstances, the court’s ultimate award of 25% was

not unreasonable. See Hanlon v. Chrysler Corp., 150

F.3d 1011, 1029 (9th Cir. 1998) (referring to 25% in

attorneys’ fees as a “benchmark award”). Further, the

court’s calculation of 25% of the total award, rather

than 25% of the amount actually collected by the

class, was proper, and was in line with Ninth circuit

App. 9

precedent. See id. (discussing awards of 25% of the

common fund as benchmark figure).

Evans also argues that the district court abused

its discretion in using the percent-of-recovery ap-

proach (rather than the lodestar multiplier approach)

in calculating attorneys’ fees. However, “[i]n ‘common-

fund’ cases where the settlement or award creates a

large fund for distribution to the class, the district

court has discretion to use either a percentage or

lodestar method.” Hanlon, 150 F.3d at 1029 (internal

citations omitted). Similarly, Evans’ contention that

the district court erred in using common fund prin-

ciples in assessing the award of attorneys’ fees is

inconsistent with Ninth Circuit jurisprudence, which

permits the application of common fund principles

where — as in the present case — the class of

beneficiaries is identifiable and the benefits can be

traced in order to allocate the fees to the class. See

Petition of Hill, 775 F.2d 1037, 1041 (9th Cir. 1985)

(citing Alyeska Pipeline Service Co. v. Wilderness

Society, 421 U.S. 240, 265 n.39 (1975)).

Therefore, the district court did not abuse its

discretion in approving the settlement, including the

award of attorneys’ fees, as fair, reasonable, and

adequate.

III. D’Aria’s Claim

In order to challenge the fairness of the settle-

ment or the reasonableness of class counsel’s fees,

D’Aria must either submit a timely objection to the

App. 10

settlement or be granted leave to intervene. D’Aria

failed to submit a timely objection to the settlement.

One month after the deadline to opt out of the

settlement, D’Aria sought to intervene in the suit as a

matter of nght, pursuant to Rule 24(a)(2) of the

Federal Rules of Civil Procedure. See Fed. R. Civ. P.

24(a); ER 448. The district court properly denied

D’Aria’s motion to intervene as of right because

D’Aria’s motion was untimely. See ER 451-454.

The district court’s decision is AFFIRMED.

App. 11

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

—

JOSEPH GLASS; DANTE No. 07-15278

DIFRANCESCO; RALPH

D.C. No.

CARBONE; DAVID !

BACHRACH, individually asi as oo eee

and on behalf of all others of California

similarly situated, San Francisco

Plaintiffs-Appellees, ORDER

UBS FINANCIAL SERVICES,

INC., a corporation; UBS

PAINE WEBBER, a

corporation; PAINE WEBBER

GROUP, INC., a corporation,

Defendants-Appellees,

(Filed May 14, 2009)

ANTHONY D’ARIA,

Plaintiff-intervenor-

Appellant.

App. 12

JOSEPH GLASS; DANTE

DIFRANCESCO; RALPH

CARBONE; DAVID

BACHRACH, individually

and on behalf of all others

similarly situated,

Plaintiffs,

and

MARTY EVANS,

Plaintiff-Appellant,

UBS FINANCIAL SERVICES,

INC., a corporation; UBS

PAINE WEBBER, a

corporation; PAINE WEBBER

GROUP, INC., a corporation,

Defendants-Appellees,

Vv.

ANTHONY D’ARIA,

Plaintiff-intervenor.

No. 07-15309

D.C. No.

CV-06-04068-MMC

Northern District

of California,

San Francisco

Before: FARRIS, NOONAN and McKEOWN, Circuit

Judges.

The memorandum filed on February 9, 2009 is

hereby withdrawn.

App. 13

NOT FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

JOSEPH GLASS; DANTE

DIFRANCESCO; RALPH

CARBONE; DAVID

BACHRACH, individually

and on behalf of all others

similarly situated,

Plaintiffs-Appellees,

UBS FINANCIAL SERVICES,

INC., a corporation; UBS

PAINE WEBBER, a

corporation; PAINE WEBBER

GROUP, INC., a corporation,

Defendants-Appellees,

ANTHONY D’ARIA,

Plaintiff-intervenor-

Appellant.

No. 07-15278

D.C. No.

CV-06-04068-MMC

MEMORANDUM*

(Filed Feb. 9, 2009)

* This disposition is not appropriate for publication and is

not precedent except as provided by 9th Cir. R. 36-3.

App. 14

JOSEPH GLASS; DANTE

DIFRANCESCO; RALPH

CARBONE; DAVID

BACHRACH, individually

and on behalf of all others

similarly situated,

Plaintiffs,

and

MARTY EVANS,

Plaintiff-Appellant,

UBS FINANCIAL SERVICES,

INC., a corporation; UBS

PAINE WEBBER, a

corporation; PAINE WEBBER

GROUP, INC., a corporation,

Defendants-Appellees,

ANTHONY D’ARIA,

Plaintiff-intervenor.

No. 07-15309

D.C. No.

CV-06-04068-MMC

Appeal from the United States District Court

for the Northern District of California

Maxine M. Chesney, District Judge, Presiding

Argued and Submitted January 14, 2009

San Francisco, California

App. 15

Before: FARRIS, NOONAN and McKEOWN, Circuit

Judges.

This dispute arises from the district court’s ap-

proval of a class action settlement between the

named plaintiffs and the defendant, UBS Financial

Services. On appeal, plaintiff-objector Marty Evans

raises several objections to the district court’s deter-

mination that the settlement was fair, reasonable,

and adequate as required by Fed. R. Civ. P. 23(e).

Appellant Anthony D’Aria objects to the district

court’s denial of his motion to intervene in the case on

the grounds that it was untimely. The parties are

familiar with the facts.

I. Pending motions

We grant UBS’s motion to strike documents from

D’Aria’s excerpts of record which were submitted to

the district court after the final approval of the

settlement. See Kirshner v. Uniden Corp. of Am., 842

F.2d 1074, 1077-78 (9th Cir. 1988). We also grant

UBS’s motion for judicial notice of the Bowman dec-

laration.

II. Evans’s Claims

Evans argues, on several grounds, that the dis-

trict court abused its discretion in determining that

the settlement was fundamentally “fair, reasonable,

and adequate,” as required by the Federal Rules of

Civil Procedure. Fed. R. Civ. P. 23(e). “The district

App. 16

court’s decision to approve or reject a settlement is

committed to the sound discretion of the trial judge

because he is exposed to the litigants, and their

strategies, positions, and proof.” Jn re Mego Financial

Corp. Securities Litigation, 213 F.3d 454, 458 (9th Cir.

2000) (internal citations omitted). Each of Evans’

arguments is addressed below.

First, Evans argues that because the named

plaintiffs are all former employees of defendants, they

cannot fairly and adequately represent a class that

includes both current and former UBS employees. ER

474. A class action may be maintained only if “the

representative parties will fairly and adequately pro-

tect the interest of the class.” Fed. R. Civ. P. 23(a)(4).

The present settlement aims to provide compensation

for unlawful practices occurring during the class

period. For that period, “both the former and current

employees are equally interested in obtaining com-

pensation for the assertedly unlawful practices set

forth in the complaint.” ER 475.' Therefore, the dis-

trict court did not abuse its discretion in finding that

the class-representatives adequately represented the

interests of the class. See Cummings v. Connell, 316

F.3d 886, 896 (9th Cir. 2003) (“this circuit does not

favor denial of class certification on the basis of spec-

ulative conflicts”).

As the district court noted, the settlement does not pre-

clude any class member from filing suit against UBS for viola-

tion of the law occurring outside of the class period. ER 475.

App. 17

Second, Evans argues that the court violated the

rights of class members from states other than New

York, Pennsylvania, and New Jersey by approving a

plan of allocation that distributes a greater propor-

tion of the settlement funds to class members in those

states. ER 63. The Special Master and the district

court found that the parties had set forth a reasoned

basis for treating claimants employed in these three

states differently from claimants in other jurisdic-

tions. ER 479; see also, JSER 197 (Special Master’s

report concluding that the disproportionate allocation

was justified by differences among the states re-

garding “the definition of employees; the definition of

wages; various exemptions; varieties of allowed or

disallowed deductions from employee compensation;

elements of the causes of action available in various

states; and variances in the recoveries of the debt,

interest, attorneys’ fees, costs and penalties”). On

appeal, Evans does not address the substance of the

parties’ or the court’s reasoning, nor does he address

the differences in law between the states at issue.

Moreover, the fact that one of the named plaintiffs

was a class member from a state other than New

York, New Jersey, and Pennsylvania, undermines

Evans’s allegations of inadequate representation. ER

461, n. 1. Therefore, the district court did not abuse

its discretion in rejecting Evans's objection to the plan

of allocation.

Third, Evans argues that the district court erred

in appointing a Special Master, pursuant to Rule 53

of the Federal Rules of Civil Procedure, without first

App. 18

obtaining consent from Evans. ER 476; Fed. R. Civ. P.

53. Rule 53(a) permits the appointment of a Special

Master for, among other things, the “perform[ance of]

duties consented to by the parties,” or without

consent when appointment is warranted by “the need

to perform an accounting or resolve a difficult compu-

tation of damages.” See Fed. R. Civ. P. 53(a)(1)(A)-

(C). In this case the named plaintiffs representing the

class and the defendant together requested the

appointment of the Master to address the parties’

damages analysis. This is sufficient to justify the

appointment of a special Master.

Fourth, Evans challenges a provision in the

settlement stating that any reduction in attorneys’

fees by the court will revert to the defendant, rather

than to the class. ER 63-64. We agree that the rever-

sion clause, as pertaining to attorneys’ fees, is prob-

lematic because it acts as a device to isolate fees from

scrutiny. See Staton v. Boeing Co., 327 F.3d 938, 964-

965, 970-71 (9th Cir. 2003).* In addition to being

* While clauses mandating the reversion of unclaimed funds

may be common, appellees cite to no cases approving a settle-

ment with a reversion clause for attorneys’ fees. See UBS Brief

at 101-02. In fact, the Ninth Circuit in Staton stated that ordi-

narily, “after the court determines tne reasonable amount of

attorneys’ fees, ail the remaining value of the fund belongs to the

class rather than reverting to the defendant.” 327 F.3d at 971. A

reversion clause for attorneys’ fees is problematic because it

removes an important economic incentive that class members

may have in challenging a fee award that may be excessive

under the circumstances. The clause also gives the district court

one less reason to challenge an award of attorneys’ fees where

(Continued on following page)

App. 19

favorable to class counsel, the reversion clause is

favorable to UBS, which will receive the ultimate

benefit of any reduction by the court. Because the

reversion clause creates incentives for the negotiating

parties to make the attorneys’ fees a larger per-

centage of the total recovery, the district court is

required to “ensure that the class members’ interest

were not compromised in favor of those of class

counsel.” See Staton, 327 F.3d at 964-65.

Here, the district court found that the class mem-

bers obtained exceptional results for the class. ER

483-84. Notably, the class representatives were able

to negotiate the settlement before the Department of

Labor issued an Opinion Letter that would have

reduced the value of plaintiffs’ claims. See ER 465;

483-84. The court also acknowledged evidence of

additional value in the settlement in the form of

forward-looking relief. See ER 475, n.7; JSER 114-15.

The fact that class counsel achieved such timely

results for the class suggest that the class’s interests

were not compromised by the reversion clause, and

that the district court did not abuse its discretion in

finding that the settlement was fair and adequate.

Finally, Evans argues that the court’s approval of

an attorneys’ fees award consisting of 25% of the total

any reduction would only benefit the defendant, who may have

all but admitted to significant violations of the law. See Staton,

327 F.3d at 970 (rejecting a condition that would “inhibit district

courts from engaging in independent determinations of rea-

sonable fees”).

App. 20

award constitutes an abuse of discretion. While we

agree that the court’s award of attorneys’ fees is high

relative to the total class recovery, the question

on appeal “is not whether the district court should

have applied some other percentage, but whether

in arriving at its percentage it considered all the

circumstances of the case and reached a reasonable

percentage.” Vizcaino v. Microsoft Corp., 290 F.3d

1043, 1048 (9th Cir. 2002) (emphasis added). In re-

viewing the award of attorneys’ fees, the district court

properly performed an informal lodestar cross-check,

and noted the relatively low time-commitment by

plaintiff’s counsel. See Hearing Transcript of January

19, 2007 (Dkt. 238); ER 483; Six Mexican Workers v.

Arizona Citrus Growers, 904 F.2d 1301, 1311 (9th Cir.

1990) (suggesting a lodestar cross-check and adjust-

ment in special circumstances when “the percentage

recovery would be either too small or too large in light

of the hours devoted to the case or other relevant

factors”). Having acknowledged that the lodestar fac-

tors weigh against a substantial award, the district

court did not abuse its discretion in giving weight

to other factors, such as the results achieved for

the class and the favorable timing of the settlement.

See Vizcaino, 290 F.3d at 1047-50. Under these cir-

cumstances, the court’s ultimate award of 25% was

not unreasonable. See Hanlon v. Chrysler Corp., 150

F.3d 1011, 1029 (9th Cir. 1998) (referring to 25% in

attorneys’ fees as a “benchmark award”).

App. 21

Evans also argues that the district court abused

its discretion in using the percent-of-recovery ap-

proach (rather than the lodestar multiplier approach)

in calculating attorneys’ fees. However, “[iJn ‘common-

fund’ cases where the settlement or award creates a

large fund for distribution to the class, the district

court has discretion to use either a percentage or

lodestar method.” Hanlon, 150 F.3d at 1029 (internal

citations omitted). Similarly, Evans’ contention that

the district court erred in using common fund prin-

ciples in assessing the award of attorneys’ fees is

inconsistent with Ninth Circuit jurisprudence, which

permits the application of common fund principles

where — as in the present case — the class of

beneficiaries is identifiable and the benefits can. be

traced in order to allocate the fees to the class. See

Petition of Hill, 775 ¥.2d 1037, 1041 (9th Cir. 1985)

(citing Alyeska Pipeline Service Co. v. Wilderness

Society, 421 U.S. 240, 265 n.39 (1975)).

Therefore, the district court did not abuse its

discretion in approving the settlement, including the

award of attorneys’ fees, as fair, reasonable, and

adequate.

Ill. D’Aria’s Claim

In order to challenge the fairness of the settle-

ment or the reasonableness of class counsel’s fees,

D’Aria must either submit a timely objection to the

settlement or be granted leave to intervene. D’Aria

failed to submit a timely objection to the settlement.

App. 22

One month after the deadline to opt out of the

settlement, D’Aria sought to intervene in the suit as a

matter of right, pursuant to Rule 24(a)(2) of the

Federal Rules of Civil Procedure. See Fed. R. Civ. P.

24(a); ER 448. The district court properly denied

D’Aria’s motion to intervene as of right because

D’Aria’s motion was untimely. See ER 451-454.

The district court’s decision is AFFIRMED.

App. 23

(Counsel of Record are Listed on Next Page)

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

JOSEPH GLASS, DANTE

DIFRANCESCO, RALPH

CARBONE, AND DAVID

BACHRACH, individually,

and on behalf of all others

similarly situated,

Plaintiffs,

VS.

UBS FINANCIAL

SERVICES INC.,

and DOES 1 through

50, inclusive,

Defendants.

CASE NO. C-06-4068 MMC

ORDER GRANTING

JOINT MOTION FOR

FINAL APPROVAL;

JUDGMENT

(Filed Jan. 26, 2007)

Date: January 19, 2007

Time: 9:00 a.m.

Place: Courtroom 7,

19th Floor

Judge:

Hon. Maxine M. Chesney

KEVIN J. McINERNEY (NYS #KM0163)

CHARLES A. JONES (CA SB# 224915)

McINERNEY AND JONES

18124 Wedge Parkway, Suite 503

Reno, NV 89511

Telephone: (775) 849-3811

Facsimile: (775) 849 3866

MICHAEL SHEN (MS85714)

MICHAEL SHEN & ASSOCIATES, P.C.

225 Broadway, Suite 2515

New York, NY 10007

Telephone: (212) 227-0300

Facsimile: (212) 227-2714

App. 24

JEFFREY DONOFRIO (ct07738)

CIULLA & DONOFRIO

127 Washington Ave.

North Haven, CT 06473

Telephone: (203) 239-9828

Facsimile: (203) 234-0379

Attorneys for Plaintiffs

M. KIRBY C. WILCOX (SB# 78576)

kirbywilcox@paulhastings.com

MICHAEL M. PFYL (SB# 240925)

michaelpfyl@paulhastings.com

MOLLY A. HARCOS (SB# 233556)

mollyharcos@paulhastings.com

PAUL, HASTINGS, JANOFSKY & WALKER LLP

55 Second Street

Twenty-Fourth Floor

San Francisco, CA 94105-3441

Telephone: (415) 856-7000

Facsimile: (415) 856-7100

Attorneys for Defendant

UBS FINANCIAL SERVICES INC.

On January 19, 2007 at 9:00 a.m., the Court

heard the joint motion by defendant UBS Financial

Services Inc. (“UBS”) and plaintiffs Joseph Glass,

Dante DiFrancesco, Ralph Carbone, and David

Bachrach (“Plaintiffs”) for final approval of the

proposed class action settlement in the instant action.

After reviewing the parties’ written submissions, and

after hearing arguments of counsel, the Court finds

and orders as follows:

1. All terms used in this order (“Final Order”)

shall have the same meaning as defined in the

App. 25

Parties’ “Amended Joint Stipulation of Settlement

And Release Between Plaintiffs Joseph Glass, Dante

DiFrancesco, Ralph Carbone, and David Bachrach

and Defendant UBS Financial Services Inc.” (“Settle-

ment”), a copy of which is attached hereto as Exhibit

2. This Court has jurisdiction over the subject

matter of the Instant action and over all parties, in-

cluding all Class Members.

3. Pursuant to the Court’s “Order Granting

Preliminary Approval Of Settlement And Setting Fi-

nal Approval Hearing” dated August 25, 2006 (“Pre-

liminary Approval Order”), the Court preliminarily

certified the following class for settlement purposes

(the “Class”):

ALL CURRENT AND FORMER EM-

PLOYEES OF UBS FINANCIAL SER-

VICES INC. (“UBS”) WHO WERE EM-

PLOYED BY UBS OUTSIDE THE STATE

OF CALIFORNIA AS FINANCIAL AD-

VISORS AND/OR NEW FINANCIAL AD-

VISORS OR FINANCIAL ADVISOR

TRAINEES DURING ALL OR PART OF

THE APPLICABLE PERIOD FOR THE

STATE OR TERRITORY IN WHICH

THEY WERE EMPLOYED BY UBS, AS

SET FORTH IN EXHIBIT E TO THE

AMENDED JOINT STIPULATION OF

SETTLEMENT AND THE NOTICE OF

PENDENCY OF CLASS ACTION.

App. 26

The Class is now finally and conclusively certified for

settlement purposes.

4. In accordance with the Preliminary Order,

the parties caused to be mailed the following: (1)

Notice of Pendency of Class Action And Opportunity

to Opt In, Proposed Settlement And Hearing Date For

Court Approval; (2) Consent to Join Settlement Form;

(3) Claim Form; and (4) Exclusion Form (collectively

the “Notice Materials”). The Notice Materials were

sent via first class mail within the time mandated in

the Preliminary Approval Order, and adequately in-

formed the Class of: (1) the pendency of the proposed

Settlement; (2) all material elements of the proposed

Settlement; (3) the January 19, 2007 hearing date for

final approval of the Settlement; and (4) the oppor-

tunity to be excluded from the proposed Class or

otherwise object to the proposed Settlement. David C.

Holland of Rust Consulting, Inc., the Claims Admin-

istrator, filed a declaration with the Court on January

5, 2007, concerning the dissemination of the Notice

Materials and the status of claims and objections.

5. The Notice Materials provided due and ade-

quate notice to Class Members and constitute the

best notice practicable and possible under the circum-

stances. The proof of dissemination filed with the

Court demonstrates that this Court’s orders have

been complied with in regard to the Notice Materials

and preliminary approval of the Settlement, and fur-

ther, that the best notice practicable and possible

under the circumstances was in fact given and con-

stituted valid, due, and sufficient notice to members

App. 27

of the Class, complying fully with all applicable stat-

utes and laws.

6. In accordance with Class Action Fairness Act

requirements, the parties caused to be mailed a copy

of the Notice Materials and a complete list of the

Class Members to the Attorneys General in each of

the 50 jurisdictions encompassed by the Settlement.

7. The Attorney General of New York filed a

Motion to Appear As Amicus Curiae To Comment on

the Proposed Class Action. The Court granted the

motion.

8. Eight Class Members and the Attorney Gen-

eral of the State of New York have objected to the

Settlement. The Court rejects these objections.

9. Additionally, Class Member Lawrence R.

Kaufmann, filed a Motion to Intervene in the Instant

action through his attorney Lovell Stewart Halebian,

LLP, which motion contained objections to the settle-

ment. Kaufmann withdrew his motion, and the Court

permitted Kaufmann to withdraw the objections

contained therein. The Court further denied the mo-

tion of Anthony D’Aria to substitute for Lawrence R.

Kaufmann as an objector and/or intervenor. The

Court also denied Anthony D’Aria’s motion to inter-

vene.

10. The Court finds that the Settlement was the

product of arms-length negotiations between experi-

enced counsel, assisted by a respected mediator. The

Court finds that the Settlement is fair, reasonable,

App. 28

and adequate, and hereby grants final approval to the

Settlement. In so doing, the Court has thoroughly

considered such factors as: the strength of the plain-

tiffs’ case; the risk, expense, complexity, and likely

duration of further litigation; the risk of maintaining

class action status throughout the trial; the amount

offered in settlement; the extent of discovery com-

pleted and the stage of the proceedings; the experi-

ence and views of counsel; and the reaction of the

Class Members to the proposed Settlement. See

Hanlon v. Chrysler Corp., 150 F.3d 1011, 1026 (9th

Cir. 1998). Plaintiffs and Defendant are ordered to

carry out the terms of the Settlement.

11. Defendant shall pay the claims presented by

the claim procedure described in the Settlement.

Defendant shall have no further liability for costs,

expenses, interest, attorneys’ fees, or for any other

charge, expense, or liability, except as provided in the

Settlement.

12. The Class is bound by the release and

waiver listed in Paragraphs 48 and 49 of the Settle-

ment, respectively, and this Final Order, which Final

Order shall have the force and effect of res judicata as

to them.

13. The class representatives, Joseph Glass,

Dante DiFrancesco, Ralph Carbone, and David

Bachrach, are bound by the release and waiver listed

in Paragraphs 50 and 51 of the Settlement, respec-

tively, and this Final Order, which Final Order shall

have the force and effect of res judicata as to them.

App. 29

14. The Settlement is not an admission by UBS

nor is this Final Order a finding of the validity of any

claims in the Instant action or any wrongdoing by

UBS. In addition, the Settlement is not an admission

nor is this Final Order a finding that the certification

of the Class is proper for any purpose or proceeding

other than for settlement purposes in the present

case. Furthermore, neither the Settlement, nor any

document, statement, proceeding or conduct related

to the settlement or the Settlement, nor any reports

or accounting of those matters, will be (i) construed

as, offered or admitted in evidence as, received as, or

deemed to be evidence for any purpose adverse to

UBS, including, but not limited to, evidence of a

presumption, concession, indication or admission by

UBS of any liability, fault, wrongdoing, omission,

concession or damage; or (ii) disclosed, referred to or

offered in evidence against UBS, in any further

proceeding in the instant action, or any other civil,

criminal or administrative action or proceeding ex-

cept for purposes of effectuating the Settlement. How-

ever, the Settlement may be admitted in evidence and

otherwise used in any and all proceedings to enforce

any or all terms of the Settlement, or in defense of

any claims released or barred by the Settlement.

15. The claims alleged in the Complaint are

hereby dismissed with prejudice, provided, however,

and without affecting the finality of this Final Order

in any way, this Court retains continuing jurisdiction

over the interpretation, implementation, administration

and enforcement of the terms of the Settlement.

App. 30

16. This Final Order is deemed final entry of

judgment as defined by Federal Rule of Civil Pro-

cedure 58(a)(1).

IT IS SO ORDERED.

DATED: January 26,2007 /s/ Maxine M. Chesney

HONORABLE

MAXINE M. CHESNEY

UNITED STATES

DISTRICT JUDGE

App. 31

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT

OF CALIFORNIA

JOSEPH GLASS, et al., No. C-06-4068 MMC

Plaintiffs, ORDER (1) GRANTING

JOINT MOTION FOR

, FINAL APPROVAL

UBS FINANCIAL OF SETTLEMENT;

SERVICES, INC., et al., (2) GRANTING CLASS

COUNSEL’S APPLICA-

TION FOR ATTOR-

NEY’S FEES, COSTS

AND CLASS REPRE-

SENTATIVE EN-

HANCEMENTS

(Filed Jan. 26, 2007)

(Docket Nos. 183, 185)

Defendants.

Before the Court are two motions filed January 5,

2007: (1) the parties’ joint motion for final approval of

settlement; and (2) class counsel’s application for

attorney's fees, costs, and class representative en-

hancements. On January 19, 2006, the Court held a

fairness hearing. Having considered the papers filed

in support of the motions, and the arguments of

counsel for the parties and for objector Marty Evans

at the fairness hearing, the Court rules as follows.

App. 32

BACKGROUND

The instant class action is asserted on behalf of a

class consisting of all persons who, at any time during

the applicable statute of limitations, are or were em-

ployed as stockbrokers at any of the brokerage offices

of UBS Financial Services Inc. or its predecessors,

UBS Paine Webber and Paine Webber Group Inc.,

anywhere in the United States or its territories, ex-

cluding California. (See Compl. { 1.) Plaintiffs Joseph

Glass, Dante DiFrancesco, Ralph Carbone, and David

Bachrach allege that they worked as stockbrokers for

defendant UBS Financial Services, Inc. and/or its

predecessors UBS Paine Webber and Paine Webber

Group, Inc. (See id. 7] 7-10.) The first four causes of

action are for failure to pay overtime wages in

violation of the federal Fair Labor Standards Act, and

New Jersey, New York, and Connecticut law." (See id.

44 27-55.) The fifth, sixth, and seventh causes of

action are for improper deductions from wages in

violation of New Jersey, New York, and Connecticut

Law. (See id. 4 56-70.)

The action was settled on January 31, 2006

during a mediation conducted by David Rotman, who,

defense counsel attests, is “one of the preeminent

mediators of employment law claims in the country.”

(See Wilcox Decl. 4 3.) On July 28, 2006, the parties

' Glass and Bachrach allege they worked for defendants in

New Jersey. (See Compl. 947, 10.) DiFrancesco alleges he

worked for defendants in New York. (See id. 4 8.) Carbone

alleges he worked for defendants in Connecticut. (See id. at 9.)

App. 33

filed a joint motion for preliminary approval of the

proposed settlement. The amended joint stipulation of

settlement provides for a maximum payment of

$45,000,000 to a class consisting of “all persons who

work or worked for UBS in the Covered Positions

during the Covered Period in the United States

including United States territories, and excluding the

state of California.” (See Amended Joint Stipulation

of Settlement 7] 5, 29(a).) “UBS” is defined to include

“UBS Financial Services, Inc. and all of its officers,

directors, agents, attorneys, parents, predecessors

(including UBS Paine Webber and Paine Webber

Group Inc.), successors, subsidiaries, and related and

affiliated entities, including UBS International, Inc.”

(See id. 4 2.) The “covered positions” are defined as

“job codes 226 and 008226, Unregistered Trainee; job

codes 456 and 008456, Broker; and job codes 457 and

008457, Registered Trainee at UBS.” (See id. { 14.)

The “covered period” varies depending on “the appli-

cable statute of limitations period for the jurisdiction

in which the Class Member was employed.” (See id.

4 13 and Ex. E.)

The proposed settlement further provides that of

the $45,000,000 settlement amount, the following

amounts will be deducted, subject to court approval:

(1) attorney’s fees and litigation costs in an amount

up to $11,250,000; (2) “enhancements” to the four

named class representatives, in an amount up to

$100,000 ($25,000 each); and (3) a “reasonable

amount” to the Claims Administrator to administer

the settlement. (See id. 4 29(a).) The settlement

App. 34

provides that all unclaimed funds will revert to UBS,

as well as any portion of the maximum $11,500,000 in

attorney’s fees and $100,000 in enhancements that is

not awarded by the Court. (See id. |] 29(b), 30-31.)

Each class member who participates in the

settlement will receive a fixed payment from the

settlement fund based on the number of months or

partial months he or she worked in a covered position

for the period between the commencement of the

applicable statute of limitations for the state or

territory in which that class member worked for UBS

and the date of preliminary approval. (See id. J 32(c).)

The Class Notice provides that class members who

worked in New York, New Jersey, or Pennsylvania

will receive $120.00 for each full or partial month

worked during the class period, while class members

who worked in other states will receive $75.00 for

each full or partial month worked during the ciass

period.’ (See Class Notice at 3 ¥ C.)

On August 25, 2006, the Court granted pre-

liminary approval of the settlement and set a fairness

hearing for January 19, 2007. Pursuant to the Class

* According to the settlement, “The formula developed by

the parties allocates a greater proportion of the settlement funds

to class members in New York, New Jersey, and Pennsyivania

than to class members in other jurisdictions because the law and

litigation activity regarding wage deductions in other jurisdic-

tions likely would have caused the parties to devote dispro-

portionate resources to the litigation with uncertain results.”

(See id. J 29(b).)

App. 35

Notice, any objections to the settlement were required

to be mailed on or before November 14, 2006. (See

Class Notice at 7 { C.)

The Court received objections to the settlement

from the following class members: (1) Clinton E.

Anderson (“Anderson”), dated September 20, 2006; (2)

Norman Demetrios Pappous (“Pappous”), dated Sep-

tember 20, 2006; (3) Steven D. Arkwright (“Ark-

wright”), dated September 21, 2006; (4) Jason Cintron

(“Cintron”), dated September 26, 2006; (5) Geoffrey

Earl Wilwerding (“Wilwerding”), dated October 18,

2006; (6) Christopher C. Gabriel (“Gabriel”), dated

November 7, 2006; (7) Marty Evans (“Evans”), dated

November 14, 2006; and (8) Shrenik Bavishi

(“Bavishi”), dated November 14, 2006. Evans also

filed supplemental objections, dated December 21,

2006, relating to the Court’s appointment of a special

master. In addition, the Court, on January 8, 2007,

granted the motion of the Attorney General of the

State of New York (“New York Attorney General”) to

appear as amicus curiae, and the New York Attorney

General has filed an amicus brief raising its concerns

about the settlement.

Additionally, class member Lawrence R. Kauf-

mann (“Kaufmann”) filed a motion to intervene,

which motion contained objections to the settlement.

Kaufmann subsequently withdrew the motion. By

orders filed November 16, 2006 and January 17,

2007, the Court permitted Kaufmann to withdrawy, re-

spectively, both his motion to intervene and his

objections to the proposed settlement. After Kaufmann

App. 36

withdrew his motion to intervene, class member

Anthony D’Aria filed a motion to adopt Kaufmann’s

objections and a motion to intervene in the action. By

orders filed November 16, 2006 and January 17,

2007, respectively, the Court denied D’Aria’s motions.

On December 7, 2006, pursuant to the joint mo-

tion of the parties, the Court appointed the Honorable

Charles A. Legge (hereafter “Judge Legge”) as a

special master, pursuant to Rule 53 of the Federal

Rules of Civil Procedure, “to review issues or ques-

tions ... relative to the allocation among different

states of the settlement proceeds” and to “determine

whether the allocation formula in the settlement is

fair, reasonable and adequate in light of any timely

challenges to that allocation.” (See Order Appointing

the Honorable Charles Legge as Master Pursuant to

the Stipulation of the Parties (“Stipulated Appoint-

ment Order”), filed Dec. 7, 2006, at 2-3.) Pursuant to

such authority, Judge Legge held a hearing on the

matter on January 4, 2007, and, on January 12, 2007,

filed a “Report, Findings and Recommendations of the

Master.”

LEGAL STANDARD

The Court may approve a class action settlement

“only after a hearing and on finding that the settle-

ment ... is fair, reasonable, and adequate.” See Fed.

R. Civ. P. 23(e)(1C). “Assessing a settlement pro-

posal requires the district court to balance a number

of factors: the strength of the plaintiffs’ case; the nsk,

App. 37

expense, complexity, and likely duration of further

litigation; the risk of maintaining class action status

throughout the trial; the amount offered in settle-

ment; the extent of discovery completed and the stage

of the proceedings; the experience and views of coun-

sel; the presence of a governmental participant; and

the reaction of the class members to the proposed

settlement.” Hanlon v. Chrysler Corp., 150 F.3d 1011,

1026 (9th Cir. 1998).

“It is the settlement taken as a whole, rather

than the individual component parts, that must be

examined for overall fairness.” Jd. “The settlement

must stand or fall in its entirety.” Jd. The Court may

not delete, modify, or rewrite particular provisions of

the settlement. See id. “Settlement is the offspring of

compromise; the question . . . is not whether the final

product could be prettier, smarter, or snazzier, but

whether it is fair, adequate, and free from collusion.”

See id.

DISCUSSION

A. Joint Motion for Final Approval

1. Strength of case

The Court is aware of no controlling federal or

state authority on the issue of whether stockbrokers

are entitled to overtime pay. As set forth below, the

legal uncertainty at the time of settlement with

respect to whether stockbrokers are entitled to over-

time under federal and state law thus favors settle-

ment of the instant action.

App. 38

The FLSA contains various exemptions from its

requirement that employers pay their employees time

and a half for work in excess of 40 hours per week,

including, in particular, an exemption for “any em-

ployee employed in a bona fide ... administrative...

capacity.” See In re Farmers Insurance Exchange, 466

F.3d 853, 858-59 (9th Cir. 2006); see also 29 U.S.C.

§ 213(a)(1). After the instant settlement was nego-

tiated, one federal district court held the question of

whether the stockbroker plaintiffs therein had per-

formed work qualifying for such “administrative

exemption” presented a triable issue of material fact

that precluded summary judgment. See Takacs v.

A.G. Edwards and Sons, Inc., 444 F. Supp. 2d 1100,

1110-13 (S.D. Cal. 2006). Thereafter, on November 27,

2006, the Department of Labor issued an Opinion

Letter stating that stockbrokers, to the extent they

perform certain duties, meet the requirements of the

administrative exemption and, thus, are not entitled

to overtime under the FLSA. (See Wilcox Decl. Ex. I

at 8.) Although not binding authority, courts “must

give deference to the DOL’s interpretation of its own

regulations through, for example, Opinion Letters.”

See Farmers, 466 F.3d at 860. No court to date has

determined the appropriate amount of deference to be

afforded the November 27, 2006 Opinion Letter. As

the parties note, “[t]he bottom line is that the law in

this area is sparse and the outcome of any litigation

was far from clear, for either UBS or the Plaintiffs.”

Accordingly, this factor supports approval of the

settlement.

App. 39

2. The risk, expense, complexity, and likely

duration of further litigation

In light of the above-referenced uncertainty in

the law, the risk, expense, complexity, and likely du-

ration of further litigation likewise favors the settle-

ment. Regardless of how this Court might have ruled

on the merits of the legal issues, the losing party

likely would have appealed, and the parties would

have faced the expense and uncertainty of litigating

an appeal. “The expense and possible duration of the

litigation should be considered in evaluating the

reasonableness of [a] settlement.” See In re Mego

Financial Corp. Securities Litigation, 213 F.3d 454,

458 (9th Cir. 2000). Here, the risk of further litigation

is substantial.

Accordingly, this factor supports approval of the

settlement.

3. The risk of maintaining class action

status throughout the trial

As the parties observe, the proposed settlement

“accords every Covered Employee in every state the

right to participate in the claim procedure without

regard to factual and legal idiosyncrasies in their

claims.” (See Motion at 9:4-5.) Because the instant

class covers employees who worked in every state

other than California, the Court agrees with the

parties that “{gliven the diverse law that surrounds

overtime eligibility and wage deductions across the

country,” it was by no means certain that plaintiffs

App. 40

would have been able to obtain certification of the

wall-to-wall class that UBS is willing to accept for

settlement purposes.” (See Motion at 9:5-8.)

Accordingly, this factor supports approval of the

settlement.

4. The amount offered in settlement

In determining whether the amount offered in

settlement is fair, the Ninth Circuit has suggested

that the Court compare the settlement amount to the

parties’ “estimates of the maximum amount of dam-

ages recoverable in a successful litigation.” See In re

Mego Financial Corp. Securities Litigation, 213 F.3d

at 459. “[A] cash settlement amounting to only a frac-

tion of the potential recovery does not per se render

the settlement inadequate or unfair,” however. See id.

Here, the parties represented to the Court at the

preliminary approval hearing that the amount of the

settlement constituted approximately 25 to 35% of

the amount of damages plaintiffs could have hoped to

prove at trial. (See New York Attorney General Decl.

Ex. 1 (Transcript of Aug. 11, 2006 preliminary ap-

proval hearing) at 13:1-14:5.) The parties provided

support for that calculation at the January 19, 2007

final fairness hearing. The Court finds a settlement

based on such percentage reasonable in light of the

uncertainties involved in the litigation.

Accordingly, this factor supports approval of the

settlement.

App. 41

5. The extent of discovery completed and

the stage of the proceedings

Here, no formal discovery took place prior to

settlement. As the Ninth Circuit has observed, how-

ever, “{iJn the context of class action settlements,

‘formal discovery is not a necessary ticket to the

bargaining table’ where the parties have sufficient

information to make an informed decision about

settlement.” See In re Mego Financial Corp. Securities

Litigation, 213 F.3d at 459. In that regard, plaintiffs

state that prior to mediation, plaintiffs’ counsel

“receivied] informal discovery relating to the types

and amounts of deductions taken by UBS, the months

worked, and the salaries of UBS financial advisors,”

as well as “the benefit of information and documents

given to [counsel] by [] many current and former

UBS brokers.” (See McInerney Decl. { 13.) In addi-

tion, plaintiffs’ counsel attests, he “deposed a consult-

ant for UBS regarding the methodology of gathering

the data that was provided at the mediation” and

“received absolutely no indication that any of the

material provided by UBS was incorrect.” (See id.

q 16.)

Accordingly, this factor supports approval of the

settlement.

6. The experience and views of counsel

The settlement was negotiated and approved by

experienced counsel on both sides of the litigation,

with the assistance of a well-respected mediator with

App. 42

substantial experience in employment litigation.

Accordingly, this factor supports approval of the

settlement.

7. The presence of a governmental par-

ticipant

One of the factors the Court may consider in

evaluating the fairness of a settlement is “the

presence of a governmental participant.” See Hanlon

v. Chrysler Corp., 150 F.3d at 1026. The participation

of a governmental entity “serves to protect the in-

terest of the class members.” See Marshall v. Holiday

Magic, Inc., 550 F.2d 1173, 1178 (9th Cir. 1977).

There is no indication that any governmental entity

participated in the settlement of the instant action.

Accordingly, this factor favors neither approval

nor disapproval of the settlement.

8. The reaction of the class members to

the proposed settlement

On September 15, 2006, notice of the settlement

was mailed to 13,176 class members. (See Holland

Decl. 7 6.) As of January 4, 2007, the parties had

received 6684 claim forms, representing approxi-

mately 51% of the total class members. (See id. 7 11.)

The claim forms submitted seek compensation for a

total of 241,609 qualified full or partial months

worked during the class period, representing approx-

imately 63% of a total of 386,271 qualified full or

partial months worked by the class during the class

App. 43

period. (See id. 11.) The claims submitted seek pay-

ment of approximately $21,133,928 from the settle-

ment fund. (See id.)

As of January 4, 2007, class members had sub-

mitted 280 requests to opt out of the settlement,

representing an opt-out rate of approximately two

percent. (See id. {{ 16-18.) As noted above, timely

objections to the settlement were submitted by eight

class members and, as amicus, the New York Attor-

ney General.

a. Objections by New York Attorney

General

The objections of the New York Attorney General

fall into three general categories. First, the New York

Attorney General contends the settlement is unfair to

New York class members because the recovery for

each New York class member is less than the amount

each California class member received in the settle-

ment of the related action, Bowman v. UBS, C-04-

3525. Second, the New York Attorney General objects

to the requested attorney’s fee award as excessive.

Third, the New York Attorney General contends that

the attorney’s fee award provision of the settlement is

contrary to Ninth Circuit authority as set forth in

Staton v. Boeing, 327 F.3d 938 (9th Cir. 2003) and, as

such, requires rejection of the settlement. The Court

will address the New York Attorney General’s sub-

stantive objections below, and will address its

App. 44

objections to the amount of fees sought in connection

with class counsel’s application for attorneys’ fees.

i. Comparison to Bowman Settle-

ment

The Bowman action, although addressing issues

similar to those raised by the instant action, was an

entirely separate and distinct case. In Bowman, a

class of California stockbrokers, represented by dif-

ferent counsel than those representing the Glass

plaintiffs, asserted claims under the FLSA and

California law for unpaid overtime and improper

wage deductions. Bowman was settled before any of

the three cases ultimately consolidated as the Glass

action was filed.

Because Bowman and Glass are separate actions

that were separately litigated and separately settled,

any direct comparison of the Bowman and Glass

settlements is unwarranted. Indeed, even if the two

actions were otherwise indistinguishable, a settle-

ment for a lesser amount nonetheless may constitute

a fair, reasonable, and adequate compromise of the

dispute. Settlements by their very nature are not

intended to provide full compensation for the claimed

losses and consequently cannot be calculated with the

same precision as actual damages. See, e.g., Wal-Mart

Stores, Inc. v. Visa U.S.A. Inc., 396 F.3d 96, 119 (2d

Cir. 2005) (noting existence of “range of reason-

ableness” with respect to any settlement).

App. 45

Moreover, defendants have submitted a response

to the New York Attorney General’s amicus brief,

setting forth in detail the reasons for their belief that

their defenses to plaintiffs’ claims are stronger under

New York law than under California law and,

accordingly, why defendants were willing to settle the

California claims for a higher amount per class

member. In response, the New York Attorney General

now concedes there is a “major difference” between

New York and California overtime laws and, in

particular, that “it is significantly easier to meet the

FLSA (and New York) administrative exemption,

greatly increasing the risk that New York as com-

pared with California brokers would be found exempt

from overtime law.” (See New York Attorney General’s

Reply at 3:1-4.) Additionally, the New York Attorney

General now acknowledges that “longer working

hours in California ... might explain a portion of the

greater monetary recovery available in the Bowman

settlement.” (See id. at 4:12-13.) Although the New

York Attorney General continues to take issue with

defendants’ arguments that California law on the

wage deduction claims and availability of penalties is

more favorable to plaintiffs than New York law, the

Court finds the undisputed differences between Cali-

fornia law and New York law with respect to the

overtime claims suffices to justify the differences

between the Bowman and Glass settlements.

Accordingly, the Court finds the differences be-

tween the Bowman and Glass settlements do not war-

rant rejection of the instant settlement.

App. 46

ii. Attorney’s Fees

As noted above, the New York Attorney General’s

objections to the amount of attorney’s fees sought will

be addressed below in connection with class counsel’s

motion for attorneys’ fees.

iii. Staton v. Boeing

The New York Attorney General argues that the

Ninth Circuit’s opinion in Staton v. Boeing requires

rejection of the proposed settlement. In particular, the

New York Attorney General reads that decision to

hold a settlement that provides for class counsel’s

seeking a specified percentage of a common fund,

with a reversion to the defendant of any portion of the

requested amount not granted by the court, “‘allows

too much leeway for lawyers representing a class to

spurn a fair, adequate and reasonable settlement for

their client in favor of inflated attorney’s fees.’” (See

Amicus Brief at 17:11-15 (quoting Staton, 327 F.3d at

969-70).

The language from Staton on which the New

York Attorney General relies does not stand for the

broad proposition asserted by the New York Attorney

General. In Staton, the settlement therein at issue

provided for an award of a fixed amount of attorneys’

fees, which fees were not subject to court review. See

Staton, 327 F.3d at 944-45; see also id. at 969 (“The

partics negotiated the amount of attorneys’ fees

awarded as a term of the settlement agreement and

thus conditioned the merits settlement upon judicial

App. 47

approval of the agreed-upon fees.”). The Ninth Circuit

found the lack of any provision for judicial review of

the fees created a risk that class counsel would

“spurn a fair, adequate and reasonable settlement for

their clients in favor of inflated attorneys’ fees,” and

held that “in order to obtain fees justified on a com-

mon fund basis, the class’s lawyers must ordinarily

petition the court for an award of fees, separate from

and subsequent to settlement.” See id. at 945.° Here,

by contrast, the settlement expressly provides for a

determination by the Court of the amount of fees to

be awarded to class counsel. (See Amended Joint

Stipulation of Settlement { 29(a).) Although the

settlement further provides that if the Court does not

award the maximum amount of $11,250,000 in fees,

the difference between that figure and the amount

actually awarded will be returned to defendants, such

provision does not conflict with Staton; the provision

for court review of the amount of fees awarded

adequately addresses the Ninth Circuit’s concern that

class counsel might negotiate “an excessive fee at the

expense of the class.” See id. at 972.

* Although, as the New York Attorney General correctly

notes, the Ninth Circuit described with approval a procedure by

which the parties would agree to the amount of a common fund

and provide for court determination of the amount of fees to be

awarded from the fund, with distribution of the remainder “to

the class rather than reverting to the defendant,” see id. at 972,

the Ninth Circuit stressed that such procedure was but onc

permissible alternative and that it did “not mean to preclude all

others,” see id. at 972 n.22.

App. 48

Accordingly, the Court finds Staton does not

warrant rejection of the settlement.

b. Objections of Anderson, Arkwright,

Wilwerding, and Gabriel

Class members Anderson, Arkwright, Wilwerding,

and Gabriel do not object to any particular provision of

the settlement. Rather, each objects to the filing of

the Glass action in the first instance. In particular,

Anderson states that he is “offended” by “Financial

Advisers who sue to ‘recover’ overtime and business

expenses when they knew full well how [the]

industry’s compensation structure works”; he further

states he wishes to “register [his] disgust at this

lawsuit and settlement.” (See Anderson Objection at

2.) Likewise, Arkwright expresses the opinion that

the instant action “is shameful and disturbing” and

contends that “[t]he people involved in bringing this

action should try to work, earn an honest living and

do the right thing instead of sucking of]f] others like a

leach.” (See Arkwright Objection at 1 (emphasis

deleted)) Wilwerding states that he “object[s] to the

entire settlement” because the plaintiffs “were never

promised any compensation for overtime when they

hired on”; he further offers his opinion that the

instant action “is a pure opportunistic case which [in]

the end result does no more than hurt the investors

App. 49

whom we serve.” (See Wilwerding Objection at 1-2.)

Gabriel states that the suggestion that “UBS some-

how has mistreated [him] is an affront to both [his]

own positive experiences and to the closely-guarded

reputation of th{e] firm” and expresses the opinion

that “all of the time and money wasted by this sorry

lawsuit could have been deployed productively

elsewhere by UBS and all involved.” (See Gabriel

Objection at 1-2.)

As each of the above-referenced objections chal-

lenges the filing of the lawsuit, and not the fairness of

either the settlement as a whole or any particular

provision thereof, such objections do not support

rejection of the settlement. Anderson, Arkwright,

Wilwerding, and Gabriel were free to opt out if they

did not wish to participate in the instant litigation,

and Wilwerding in fact did so.

c. Objections of Pappous

Pappous objects to the allocation of settlement

proceeds. In particular, Pappous argues that “the cost

of [his] labor was just as much in Virginia as it was in

New Jersey, Pennsylvania, or New York” and that

there “is no justifiable methodology which allocates

60% more ($75 vs. $120) to the individuals who

worked in” New Jersey, Pennsylvania and New York.

(See Pappous Decl. at i.)

* Wilwerding also expressly opted out of the instant action.

(See Wilwerding Objection at 4.)

App. 50

The parties, however, do not purport to compen-

sate class members from New Jersey, Pennsylvania,

and New York at a higher rate because Financial

Advisers in those states have higher salaries, but

rather because their legal claims are more valuable in

those states than the claims of class members in

other jurisdictions.

Accordingly, Pappous’s objection does not war-

rant rejection of the settlement.

d. Objections of Cintron

Cintron asserts two objections to the proposed

settlement. At the outset, Cintron argues that the

settlement fails to compensate him for the actual

amount of overtime he worked. Cintron misunder-

stands the purpose of the settlement, which is not to

provide full compensation for all overtime hours each

class member worked, but to compensate class

members for the value of their legal claims to over-

time pay. As the parties point out, the recent Opinion

Letter from the Department of Labor provides

support for UBS’s contention that class members’ are

unlikely to be able to prove their entitlement to any

overtime pay under the FLSA. The Court finds this

objection does not warrant rejection of the settlement.

Additionally, Cintron objects to the amount of

attorneys’ fees sought by plaintiffs’ counsel. The

Court will address such objection below in connection

with class counsel’s motion for attorney’s fees.

App. 51

e. Objections of Bavishi

Although Bavishi has submitted objections to the

settlement, he also has opted out. (See Holland Decl.

q 23 and Ex. A.) Consequently, as Bavishi is no longer

a class member, he has no standing to object.’ See

Fed. R. Civ. P. 23(e)(4)(A) (providing “any class

member may object to a proposed settlement”); May-

field v. Barr, 985 F.2d 1090 (D.C. Cir. 1993) (holding

“(tlhose who are not class members, because they are

outside the definition of the class or have opted out”

lack standing to object to class settlement); Jenson v.

Continental Finance Corp., 591 F.2d 477, 482 n.7 (8th

Cir. 1979) (“Opt-outs . .. are not members of the class

and hence are not entitled to the protection of Rule

23(e).”).

Accordingly, the Court does not consider Bavishi’s

objections.”

* On January 17, 2007, Bavishi filed a motion to opt back

into the settlement. Because Bavishi, by such motion, seeks to

assert an untimely claim, and because the settlement provides

that the claims administrator “will perform the duties of ...

resolving any disputes regarding claims by the Class Members”

and will “timely notify class claimants whose claims are un-

timely or denied for other reasons,” (see Amended Joint Stipu-

lation of Settlement {4 3, 46), Bavishi’s motion is hereby

DENIED without prejudice to his making such request of the

claims administrator.

* The Court further notes that Bavishi’s objections relate to

(1) issues that are not the subject of the class claims and (2)

Bavishi’s misunderstanding of class action litigation procedures,

and, consequently, would not require rejection of the settlement

even if the Cuurt were to consider such objections.

App. 52

f. Objections of Evans

Evans has submitted numerous objections to the

settlement and to the amount of attorneys’ fees

sought by class counsel. The Court first will address

Evans’s substantive objections, and thereafter, in

discussing class counsel’s application for fees, will

address Evans’s objections to the amount of fees.

i. Damages Analysis

Evans’s first objection is that the parties have

provided no analysis of the value of the class’s claims.

Evans contends that the parties “should be able to

provide the Court and class members with informa-

tion on the monetary value of: (a) the class’s ‘unpaid

overtime’ claims; (b) the class’s ‘unreimbursed business-

related expenses’ claims; (c) the class’s ‘improper

training error deduction’ claims; and (d) the class’s

claims for ‘interest and penalties.’” (See Evans Ob-

jection at 4:23-5:1.) Evans contends that without such

information, the Court cannot make a rational deter-

mination as to whether the amount of the settlement

is fair, reasonable, and adequate.

At the August 11, 2006 hearing on the parties’

motion for preliminary approval of the settlement,

the Court noted that because the parties had failed to

provide an estimate of the actual losses claimed by

the class members, the Court had no way of deter-

mining whether the amount of the settlement was

acceptable. (See New York Attorney General Decl. Ex.

1 at 11:25-12:22.) As the parties note, they have

App. 53

represented to the Court that the settlement con-

stitutes approximately 25 to 35% of the estimated

actual loss. (See id. at 14:2-3.) At the final fairness

hearing, the parties presented a lengthy discussion of

the above-referenced estimate, in which they repre-

sented that their estimate of the maximum loss to the

class was based on hard data obtained from inter-

views with class members, computer log-in records,

and payroll records. The Court is satisfied that the

parties had a reasonable factual basis for their esti-

mate that the $45,000,000 settlement represented, at

a minimum, 25 to 35% of the loss to the class.

Accordingly, the Court finds the amount of the

settlement was fair, reasonable, and adequate, and

that the parties’ failure to provide a detailed written

analysis of the value of the claims does not warrant

rejection of the settlement.

ii. Legal Analysis

Evans’s next objection is that the parties have

failed to “provide a detailed assessment of each

theory of liability and the evidence and the law that

would support or refute that theory.” (See Evans

Objection at 6:13-15 (internal quotation and citation

omitted).) To the extent the parties are required to do

so, the Court finds their various memoranda filed

with this Court and with Judge Legge, as well as

their presentation at the final fairness hearing,

adequately set forth a legal and factual analysis of

the claims.

App. 54

iii. Adequacy of Class Represen-

tatives

Evans next argues that because each of the

named plaintiffs is a former employee of defendants,

the named plaintiffs might not be adequate repre-

sentatives of a class that includes both current and

former UBS employees. In particular, Evans notes

that the settlement contains no statement as to

whether any UBS policies will be changed with re-

spect to class members who are current employees, a

matter in which, as Evans observes, former em-

ployees have no interest.

Rule 23(a)(4) provides that a class action may be

maintained only if “the representative parties will

fairly and adequately protect the interests of the

class.” See Fed. R. Civ. P. 23(a)(4). “The adequacy

inquiry under Rule 23(a)(4) serves to uncover

conflicts of interest between named parties and the

class they seek to represent.” Amchem Products, Inc.

v. Windsor, 521 U.S. 591, 626 (1997); see also Lerwill

v. Inflight Motion Pictures, Inc., 582 F.2d 507, 512

(9th Cir. 1978) (describing “two criteria for

determining the adequacy of representation”; “[f ]Jirst,

the named representatives must appear able to

prosecute the action vigorously through qualified

counsel, and second, the representatives must not

have antagonistic or conflicting interests with the

unnamed members of the class”). As the parties

observe, there is no conflict between the named

plaintiffs and class members who are current

employees of defendants. Both former and current

App. 55

employees are equally interested in obtaining

compensation for the assertedly unlawful practices

set forth in the complaint. The fact that, in any given

case, some of the class members may have potential

claims in addition to those raised by the named

plaintiffs does not necessarily create a conflict of

interest between the named plaintiffs and such class

members.

Here, the purpose of the instant settlement is to

provide compensation for assertedly unlawful

practices occurring during the class period. Notably,

the settlement provides for a release only of claims

“arising during the Class Members’ Released Period,”

which ends on the date of final approval of the

settlement, (see Amended Joint Stipulation of

Settlement {{ 8, 48-49), and, thus, does not preclude

any class member from filing suit against UBS for

any future violation of the law. Consequently, if any

class member is of the view that defendants’ ongoing

policies are unlawful, they remain free to challenge

such policies in a future lawsuit.’

Accordingly, the Court finds the lack of provision

for changes in defendants’ policies does not warrant

rejection of the settlement.

" The Court further notes that class counsel, in both their

fees motion and at the final hearing, represented that

defendants have agreed to implement certain policy changes.

(See Fees Motion at 2:27-3:15.)

App. 56

iv. Allocation of Settlement Fund

and Objections to Appointment

of Judge Legge as Master

Evans next argues that the parties have not

provided an adequate explanation for the allocation of

settlement funds among the class members, in

particular, the larger distribution to class members

who worked in New York, New Jersey, and

Pennsylvania as compared with the distribution to

class members who worked in other states.

As noted, the Court, at the parties’ request,

appointed Judge Legge as special master, pursuant to

Rule 53 of the Federal Rules of Civil Procedure, “to

hear and determine whether the allocation formula in

the settlement is fair, reasonable and adequate in

light of any timely challenges to that allocation.” (See

Order Appointing the Honorable Charles Legge as

Master Pursuant to the Stipulation of Parties, filed

Dec. 7, 2006.) The parties thereafter submitted

extensive briefing on the matter to Judge Legge, and

Evans filed a supplemental objection raising concerns

about the manner in which Judge Legge was

appointed as master. (See Supplemental Objection of

Plaintiff Class Member/Objector Marty Evans, filed

December 21, 2006.)

On January 12, 2007, Judge Legge issued a

“Report, findings and Recommendations of the

Master,” in which he recommended this Court find

“that the procedures for the appointment of the

Master substantially complied with the requirements

App. 57

of Rule 53; were fair, adequate and reasonable; and

that the Master has been duly appointed under Rule

53 with jurisdiction over the issue referred to him.”

(See Report, Findings, and Recommendations of the

Master, filed January 12, 2007, at 3.) Judge Legge

further recommended that “[tJhe allocation formula

... be found to be fair, reasonable, and adequate.”

(See id. at 9.)

(1) Objections to Appointment

of Judge Legge

Evans stresses that his objection to the appoint-

ment of Judge Legge “relates to procedural irregu-

larities surrounding the Order of appointment and

has nothing to do with Judge Legge’s qualifications to

serve as special master.” In particular, Evans

contends, the order appointing Judge Legge did not

comply with all of the requirements of Rule 53. In

their motion for final approval, the parties do not

address Evans’s objections to the order appointing

Judge Legge.

As Evans points out, an order appointing a

master pursuant to Rule 53 “must state” inter alia,

(1) “the circumstances — if any — in which the master

may communicate ex parte with the court or a party”;

(2) “the nature of the materials to be preserved and

filed as the record of the master’s activities”; and (3)

“the time limits, method of filing the record, other

procedures, and standards for reviewing the master’s

orders, findings, and recommendations.” See Fed. R.

App. 58

Civ. P. 53(b)(2). Although Evans correctly observes

that the proposed order submitted by the parties and

signed by Court fails to expressly set forth all of the

above-referenced information, the Court, for the

following reasons, agrees with Judge Legge that the

order is in substantial compliance with Rule 53(b)(2).

First, the Court has not communicated ex parte with

Judge Legge, nor is it aware of any ex parte com-

munications between Judge Legge and any party.

Moreover, the Court is confident that Judge Legge, as

a former federal judge, is well aware of the need to

avoid ex parte communications absent specific

authorization. Second, the order authorizes Judge

Legge to “preserve any... testimony or evidence’; all

materials submitted to Judge Legge, as well as the

transcript of the hearing before him, have been made

part of the record in the instant action. Third, the

order expressly provides that the Court could “adopt

Judge Legge’s findings or revisit them at the January

19, 2007 hearing,” (see Stipulated Appointment Order

at 2:22-23), and thus establishes the time limits and

procedure by which the Court would review Judge

Legge’s findings. Although the order does not

expressly set forth the applicable standards for

review of Judge Legge’s findings, those standards are

provided in Rule 53 itself. Because the parties did not

stipulate that Judge Legge’s findings of fact would be

either “reviewed for clear error” or “final,” the Court

must review any such findings of fact de novo. See

Fed. R. Civ. P. 53(g)(3). The Court also must review de

novo all findings of law. See Fed. R. Civ. P. 53(g)(4).

The Court may set aside any ruling on “a procedural

App. 59

matter only for an abuse of discretion.” See Fed. R.

Civ. P. 53(g)(5).

Evans further objects that he was not given an

opportunity to be heard prior to the Court’s

appointment of Judge Legge as master. Rule 53(b)(1)

requires a court to “give the parties notice and an

opportunity to be heard before appointing a master”;

Rule 53(a)(1) permits a court to appoint a master only

to “perform duties consented to by the parties.” See

Fed. R. Civ. P. 53(a)(1), (b)(1). Here, plaintiffs and

defendants expressly consented to the appointment of

Judge Legge. Evans cites no authority requiring class

counsel to obtain the consent of all members of the

class prior to agreeing to the appointment of a

master.

Finally, Evans notes that Rule 53 permits any

party to file objections to a master’s findings and

that, accordingly, he and the other objectors to the

settlement should be permitted to file objections to

Judge Legge’s findings. In particular, Rule 53(g)(2)

provides that any “party may file objections to — or a

motion to adopt or modify — the master’s order,

report, or recommendations no later than 20 days

from the time the master’s order, report, or

recommendations are served, unless the court sets a

different time.” See Fed. R. Civ. P. 53(g)(2). Assuming,

arguendo, the individual class members have such a

right separate from class counsel, here, the Court did

“set[] a different time,” by providing that Judge

Legge’s findings could be “revisitled]” at the January

19, 2007 fairness hearing. To date, no objections to

App. 60

Judge Legge’s findings have been filed, and none

were raised at the final fairness hearing.

Accordingly, the Court finds Evans’s procedural

objections to the order appointing Judge Legge

provide no basis for rejecting the proposed settle-

ment.

(2) Objections to Allocation of

Settlement Fund

Evans objects that the parties have not provided

the Court with “specific information on how the

formula for allotting settlement benefits was devel-

oped”; in particular, Evans contends, the increased

payout for class members who worked in New York,

New Jersey, and Pennsylvania appears to be based on

speculation.

Subsequent to the date of Evans’s objections, the

parties filed detailed briefing on this issue with Judge

Legge, explaining that although the value of the class

overtime claims is fairly consistent throughout all

jurisdictions (with the exception of California), the

value of the unlawful deductions claims differs

significantly between two groups of states. In the first

group, which defendant describes as the “freedom to

contract states” and which include the “vast majority”

of the jurisdictions at issue in the instant settlement,

courts “typically sustain reimbursement agreements

between employers and employees, contracts defining

wages, and/or contracts permitting wage deductions.”

(See Defendants’ memorandum to Judge Legge at

App. 61

6:23-7:3.) According to defendants, their liability in

“freedom to contract” states is “non-existent or less

than its exposure in other states.” (See id. at 7:12-13.)

In the second group, consisting of New York, New

Jersey, and Pennsylvania, the law, according to

defendants, is not as clear with respect to the

propriety of the deductions at issue. Accordingly, “[t]o

account for the parties’ greater uncertainty regarding

the likely outcome of Class Member’s deductions in

these three states, [the parties] agreed to allocate a

larger portion of the Settlement proceeds to Class

Members in New “York, New Jersey, and

Pennsylvania.” (See id. at 7:25-8:3.)

Judge Legge, in his January 12, 2007 Report,

concluded that the allocation formula is fair,

reasonable, and adequate. Having reviewed de novo

the memoranda submitted to Judge Legge, as well as

the transcript of the January 4, 2007 hearing before

Judge Legge, the Court agrees that the parties have

set forth a reasoned basis for treating claimants

employed in New York, New Jersey, and Pennsylvania

differently from claimants employed in other juris-

dictions.

Accordingly, the Court finds Evans’s objections to

the allocation formula do not warrant rejection of the

settlement.

App. 62

v. Separate Settlements in Bowman

and Glass

Evans next argues that the parties have failed to

adequately explain why Bowman and Glass were

filed as separate actions and, consequently, why

California employees are not part of the Glass

settlement. As discussed above, Bowman and Glass

were filed at separate times by separate counsel.

Moreover, Bowman was filed and settled prior to the

filing of any of the actions that ultimately were

consolidated in Glass.

Accordingly, this objection does not warrant

rejection of the instant settlement.

vi. Claims Administration

Evans’s next objection is that the settlement

grants the claims administrator the final word in

resolving disputes over claims to the settlement fund.

In particular, the settlement provides that the claims

administrator “will perform the duties of... notifying

the Parties of and resolving any disputes regarding

claims by the Class Members.” (See Amended Joint

Stipulation of Settlement at 3 7 3.) Evans contends

the settlement should be amended to grant the class

members the right to petition the Court in the event

of a dispute as to the manner in which a claim is

resolved by the claims administrator.

The parties, in response, argue that the

resolution of claims disputes is not complex, and that

App. 63

Rust Consulting, Inc. (“Rust”), the claims adminis-

trator, is an experienced neutral evaluator who is

capable of reaching a fair resolution. Consequently,

the parties argue, adding court review to the process

“would delay the Settlement for no ascertainable

purpose.” (See Motion at 17:12-25.)° Evans has

submitted no evidence calling into question Rust’s

ability to resolve in a fair manner disputes as to

claims, and has submitted no authority requiring the

Court to resolve any such disputes.

Accordingly, this objection does not warrant

rejection of the settlement.”

vii. Joseph Glass NASD Arbitration

Evans’s final objection to the settlement is that

the parties have provided no information about

" David Holland (“Holland”), Principal Consultant for Rust

Consulting, Inc., attests that as of January 4, 2007, he has

received 482 claim forms that dispute the employment history

provided to class members on their claim forms. (See Holland

Decl. 4] 20.) The settlement provides that any such disputes shall

be resolved by the claims administrator if the parties are unable

to reach an agreement as to their resolution. (See Amended

Joint Stipulation of Settlement 4 44.)

* Evans also objects that, although the Settlement provides

for a reasonable payment for the services of the claims

administrator, no information about such cost has been

provided. Holland has since attested, in his declaration filed

January 4, 2007, that “([tJhe total estimated cost for the

administration of this Settlement, including fees incurred and

future costs for completion of the administration, is

$182,847.90.” (See Holland Decl. J 24.)

App. 64

named plaintiff Joseph Glass’s claims in NASD

arbitration No. 04-04995. Evans contends such

information is “needed to ensure that there is nothing

about ... Glass’s NASD claims that would affect his

ability to adequately represent the class.” (See Evans

Objections at 11:12-17.) In response, the parties

represent that Glass’s_ arbitration “does _ not

encompass any overtime or wage deduction claims

and is entirely irrelevant to th[e] Settlement.” (See

Joint Motion at 15 n.11.) At the final fairness hearing,

the parties informed the Court that the subject of the

NASD arbitration was race and age discrimination.

No evidence has been presented to the contrary.

Accordingly, this objection does not warrant

rejection of the settlement.

g. Conclusion

For the reasons set forth above, the Court finds

the proposed settlement is fair, reasonable, and

adequate, and will GRANT the parties’ joint motion

for approval thereof.

B. Motion for Attorneys’ Fees, Costs and Class

Representative Enhancements

Class counsel moves for an award of fees and

costs in the amount of $11,250,000, as well as a

$25,000 payment to each of the four named plaintiffs.

As noted, the settlement provides for a maximum

payment of “up to $11,250,000.00 in attorney’ fees

App. 65

and litigation costs to Class Counsel, subject to Court

approval” as well as “a pool of up to $100,000.00 in

enhancements to be divided among the Class

Representatives, subject to Court approval.” (See

Amended Joint Stipulation of Settlement 4 29(a).)

1. Fees and Costs

a. Legal Standard

“Under the ‘common fund’ doctrine, ‘a litigant or

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.’” See Staton, 327 F.3d at 967 (quoting Boeing

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

doctrine rests on the presumption that persons who

obtain the benefit of a lawsuit without contributing

to its cost are unjustly enriched at the successful

litigant’s expense.’” Jd. (quoting Boeing, 444 U.S. at

478). Under the common fund doctrine, the Court

may assess “attorney’s fees against the entire fund,

thus spreading fees proportionately among those

benefited by the suit.’” See id. (quoting Boeing, 444

U.S. at 478).

Under the common fund doctrine, the Court may

award fees by using either the percentage-of-the fund

method or the lodestar method, and “no presumption

in favor of either the percentage or the lodestar

method encumbers the district court’s discretion to

choose one or the other.” See In re Washington Public

Power Supply System Securities Litigation, 19 F.3d

App. 66

1291, 1296 (9th Cir. 1994). “As always, when

determining attorneys’ fees, the district court should

be guided by the fundamental principle that fee

awards out of common funds be ‘reasonable under the

circumstances.’” Id. (quoting Florida v. Dunne, 915

F.2d 542, 545 (9th Cir. 1990) (emphasis in original)).

The Ninth Circuit has repeatedly held that 25%

of the gross settlement amount is the benchmark for

attorneys’ fees awarded under the percentage method

and that if the Court departs from that benchmark,

the record must indicate the Court’s reasons for doing

so. See, e.g., Powers v. Eichen, 229 F.3d 1249, 1256-57

(9th Cir. 2000). “The benchmark percentage should be

adjusted, or replaced by a lodestar calculation, when

special circumstances indicate that the percentage

recovery would be either too small or too large in light

of the hours devoted to the case or other relevant

factors.” See Six Mexican Workers v. Arizona Citrus

Growers, 904 F.2d 1301, 1311 (9th Cir. 1990).

b. Discussion

Class members Cintron and Evans, as well as the

New York Attorney General, have filed objections to

the amount of attorneys’ fees and costs sought by

class counsel. Cintron objects that the amount of

attorneys’ fees and costs sought “is disproportionate

and ridiculous.” (See Cintron Objection at 1.) The

New York Attorney General argues that the fees

sought are “unreasonable” in light of “the minimal

work required from plaintiffs’ counsel and _ the

App. 67

insignificant risk of non-recovery which they ran,”

and suggests that, under the circumstances, an

award based on the lodestar would be more appro-

priate. (See Amicus Curiae Memorandum of New York

Attorney General at 15-16.) Evans contends the

Court should conduct a “lodestar cross-check” against

class counsel’s request for $11,250,000 in fees and

costs.’ (See Evans Objection at 12.)

The Ninth Circuit has held that the Court may,

but is not required to, compare the lodestar and the

25% benchmark to determine if the 25% benchmark

results in an inappropriately high or low fee. See

Vizcaino v. Microsoft Corp., 290 F.3d 1043, 1050-51

(9th Cir. 2002) (observing that calculation of lodestar

provides check on reasonableness of percentage

award; affirming district court’s conclusion that fee

award of 28% of fund and 3.65 times lodestar amount

was reasonable); Fischel v. Equitable Life Assurance

Society of the United States, 307 F.3d at 1001, 1007

(9th Cir. 2002) (finding no error where district court

awarded fees under lodestar method and failed to

compare lodestar with 25% benchmark).

In the instant action, although class counsel has

not provided the Court with information from which

'° Evans’s additional, objection, that class counsel has not

documented the actual costs incurred, has been addressed by the

declaration of class counsel, filed January 5, 2007, attesting that

class counsel have incurred actual expenses in the total amount

of $56,924.07, and providing a summary thereof. (See McInerney

Decl. 7 19 and Ex. F.)

App. 68

the Court could calculate the lodestar, there can be

no doubt that the lodestar would result in a fee

substantially lower than the $11,250,000 claimed.

The dockets for the three cases that ultimately were

consolidated in the Glass action show no litigation

activity of substance other than the filing of the

complaints. (See New York Attorney General Decl.

E’s. 10, 12, 17.) Additionally, because the instant

settlement was reached prior to the filing of the Glass

action, in which those three cases were consolidated,

there was no litigation in this Court prior to settle-

ment. Since that time, however, a considerable num-

ber of filings on behalf of the plaintiff class have been

made and, of course, those filings do not necessarily

reflect all the hours spent by class counsel out of

court. Nevertheless, the Court would not expect those

out-of-court hours to affect the lodestar to the extent

of producing a fee as high as that claimed herein

under the percentage method.

The early settlement of the instant action

resulted in significant benefit to the class, however.

In light of the recent Opinion Letter of the

Department of Labor, issued November 27, 2006,

defendants likely would not agree to as large a

settlement, or, indeed, any settlement, if the parties

were attempting to negotiate a settlement today.

Class counsel expressly recognized the negative

impact an opinion letter could have on the instant

litigation well before the November 27, 2006 Opinion

Letter was issued. (See, e.g., Plaintiff’s Opposition to

Lawrence R. Kaufmann’s Motion to Intervene, filed

App. 69

Oct. 27, 2006, at 3-4 (noting “[t]he whole idea that

stockbrokers can recover for improper wage deduc-

tions or sue for overtime is clearly a novel one...

[and] a new opinion letter could end this genre as

quickly as it did a few years ago when the Depart-

ment of Labor wrote that insurance adjusters were

exempt from overtime”).) Class counsel achieved an

excellent result for the class members by settling the

instant action promptly.

Although the Ninth Circuit has noted that where

an action is settled quickly after the action is filed,

“the lodestar calculation may convince a court that

a lower percentage [than the 25% benchmark] is

reasonable,” it also has explained that it did “not

mean to imply that class counsel should necessarily

receive a lesser fee for settling a case quickly.” See

Vizcaino, 290 F.3d at 1050 and n.5. Indeed, as the

Ninth Circuit has observed, “it is widely recognized

that the lodestar method creates incentives for

counsel to expend more hours than may be necessary

on litigating a case so as to recover a reasonable fee,

since the lodestar method does not reward early

settlement.” See id. at 1050 n.5.

Moreover, the Ninth Circuit has held the “rele-

vant circumstances” that could justify an upward

departure from the 25 percent benchmark include the

achievement of “exceptional results” for the class. See

Vizcaino, 290 F.3d at 1048 (affirming fee award of 28

percent of settlement fund). Under the circumstances

presented here, where the early settlement resulted

in a significant benefit to the class, the Court finds

App. 70

no need to conduct a lodestar cross-check.'' Class

counsel’s prompt action in negotiating a settlement

while the state of the law remained uncertain should

be fully rewarded.

The New York Attorney General and Evans

further argue that even if fees are awarded under the

percentage method, the Court should base such fees

on the amount of the settlement fund actually

claimed by the class. The Ninth Circuit has held,

however, that the district court must award fees as a

percentage of the entire fund, or pursuant to the

lodestar method, not on the basis of the amount of the

fund actually claimed by the class. See Williams v.

MGM-Pathe Communications Co., 129 F.3d 1026,

1027 (9th Cir. 1997). Contrary to Evans’ argument,

the Court finds inapplicable the Class Action

Fairness Act’s provision that “any attorney’s fee

award to class counsel that is attributable to the

award of ... coupons shall be based on the value to

class members of the coupons that are redeemed.” See

28 U.S.C. § 1712(a). That statute, on its face, does not

apply to non-coupon settlements.

Accordingly, the Court finds the benchmark of

25% of the settlement is reasonable under the

circumstances presented herein.

'’ Consequently, the Court also rejects Evans’s argument

that because the class notice states defendants will not

challenge the amount of fees sought by class counsel, (see Class

Notice at 5 ¥ J), the Court must permit Evans to review class

counsel’s time records.

App. 71

2. Enhancements

Class counsel requests that the Court award a

$25,000 enhancement to each of the four class

representatives for their assistance in the instant

litigation. As noted, the settlement provides for “a

pool of up to $100,000.00 in enhancements to be

divided among the Class Representatives, subject to

Court approval.” (See Amended Joint Stipulation of

Settlement 7 29(a).)

Evans objects to payment of such enhancements,

relying on a statement in the Committee Report on

the Private Securities Litigation Act of 1995

(“PSLRA”) that “lead plaintiffs are not entitled to a

bounty for their service.” (See id.; see also 15 U.S.C.

§ 78u-4(a)(4) (“The share of any final judgment or of

any settlement that is awarded to a

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