# Petition for Writ of Certiorari — Evans v. Glass (No. 09-410) > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386017_1080%3A1 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition for Writ of Certiorari - **Published:** January 1, 2009 ## Text = —— 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 Sd 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? | il 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 Vl 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 1X 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 x] 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. S 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 2 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 3 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. 4 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 4 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. (c) Issue No. 2: Whether this Court's hold- 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 6 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. 7 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). 8 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 9 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. 10 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). 11 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 12 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 13 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). 14 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 16 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 17 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. 18 (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). 19 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. 20 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. 21 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). 22 “(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 23 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 24 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 25 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). 26 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 27 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 28 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: 29 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 30 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. 31 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. 32 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. 33 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. 34 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! 35 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)? 36 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, 37 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. 38 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, V. UBS FINANCIAL SERVICES, INC., a corporation; UBS PAINE WEBBER, a corporation; PAINE WEBBER GROUP, INC., a corporation, Defendants-Appellees, V. 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, Vv 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 V UBS FINANCIAL SERVICES, INC., a corporation; UBS PAINE WEBBER, a corporation; PAINE WEBBER GROUP, INC., a corporation, Defendants-Appellees, (Filed May 14, 2009) v. 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, Vv 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, Vv UBS FINANCIAL SERVICES, INC., a corporation; UBS PAINE WEBBER, a corporation; PAINE WEBBER GROUP, INC., a corporation, Defendants-Appellees, V. 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, Vv UBS FINANCIAL SERVICES, INC., a corporation; UBS PAINE WEBBER, a corporation; PAINE WEBBER GROUP, INC., a corporation, Defendants-Appellees, Vi 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 A. 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) Vv 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. Accordingl [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386017_1080%3A1. Public record. Not legal advice.