                                                                                                                           Opinions of the United
2001 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


3-21-2001

In Re: Cendant Corp Prides Litigation
Precedential or Non-Precedential:

Docket 99-5555




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Recommended Citation
"In Re: Cendant Corp Prides Litigation" (2001). 2001 Decisions. Paper 55.
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Filed March 21, 2001

UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT

No. 99-5555

IN RE: CENDANT CORPORATION PRIDES LITIGA TION

WELCH & FORBES, INC., an institutional investment
manager, individually and on behalf of all others
similarly situated,

v.

CENDANT CORPORATION, MERRILL LYNCH & CO.;
CHASE SECURITIES, INC.; HENRY R. SILVERMAN;
WALTER A. FORBES; COSMO CORIGLIANO

JOANNE A. ABOFF FAMILY TRUST,

         Appellant

Pursuant to Rule 12a

On Appeal from the United States District Court
for the District of New Jersey
(D.C. Civ. No. 98-02819)
District Judge: Honorable William H. W alls

Argued: Friday, December 15, 2000

BEFORE: SCIRICA, FUENTES
and GARTH, Circuit Judges

(Opinion Filed: March 21, 2001)
         Howard B. Sirota (argued)
         Sirota & Sirota LLP
         110 Wall Street, 21st Floor
         New York, New York 10005

         Counsel for Appellant

         Roger Kirby (argued)
         Kirby McInerney & Squire LLP
         830 Third Avenue, 10th Floor
         New York, New York 10022

         Counsel for Plaintiffs-Appellees

         Samuel Kadet (argued)
         Skadden, Arps, Slate, Meagher &
          Flom LLP
         Four Times Square
         New York, New York 10036

         Counsel for Defendants-Appellees

OPINION OF THE COURT

GARTH, Circuit Judge:

This appeal arises out of a class action filed on behalf of
investors in Cendant Corporation ("Cendant") after Cendant
disclosed prior "accounting irregularities" on April 15, 1998.1
Several actions were filed as a result of this disclosure,
including an action commenced on June 15, 1998 on
behalf of purchasers of Cendant's Feline PRIDES shares.
The PRIDES litigation was subsequently consolidated with
the other pending Cendant actions. However, on August 4,
1998, the District Court ruled that separate lead plaintiffs
and lead counsel were to represent the interests of the
PRIDES shareholders, as distinct from the rest of the
Cendant class. (JA1300-01.)

The firm of Kirby, McInerney & Squir e, formerly
Kaufman, Malchman, Kirby & Squire, ("Kirby") was
_________________________________________________________________

1. Although there are other defendants, we refer to all the defendants as
Cendant.

                                 2
appointed as lead counsel of the Cendant PRIDES class. On
November 12, 1998, Kirby filed a motion for class
certification, for summary judgment on the claims under
S 11 of the Securities Act, and for injunctive relief. On
behalf of the PRIDES class, Kirby entered into a proposed
settlement agreement with Cendant on Mar ch 17, 1999--
three and a half months after Kirby's motions were filed
and no more than nine months after the action had been
started.

Under the settlement agreement, Cendant agr eed to issue
Rights to new PRIDES, with a stated value of $11.71.
(JA576-79.) Those rights were in trade for existing PRIDES.
The total possible number and amount of Rights to be
distributed pursuant to the agreement was 29,161,474,
with an approximate stated value of $341,500,000. (JA590.)
Regarding Kirby's attorneys' fees, the settlement agreement
provided: "Cendant . . . will take no position on an
application by Lead Counsel for an award of fees and
expenses provided that such application shall not request
fees in excess of 10% percent [sic] of the aggregate Stated
Value of 29,161,474 Rights, which is appr oximately
$341,500,000, plus reasonable expenses incurr ed by Lead
Counsel in connection with this Action." (JA590.)

The Notice of Pendency of Class Action summarized the
proposed settlement of the PRIDES litigation. (JA239-52.)
In connection with "Lead Counsel's fees and expenses," the
Notice stated: "Lead Counsel has notified the other
signatories hereto that it intends to apply to the Court for
an award of fees, in an amount not to exceed 10% of the
aggregate Stated Value of 29,161,474 Rights, or
approximately $34.1 million, plus reasonable expenses."
(JA247.) The Notice went on to explain how the attor neys'
fees would be paid, first out of "Unclaimed Rights,"2 then
_________________________________________________________________

2. "Unclaimed Rights" are defined in the Stipulation and Agreement of
Compromise and Settlement as "Rights as to which a timely and valid
Proof of Claim has not been filed by a Holder ." (JA576.) All Unclaimed
Rights "shall be cancelled and Cendant shall not issue, sell, or
distribute
any further Rights to any other person." (Notice of Proposed Settlement,
JA248.) In addition, the Settlement provided that, though "Merrill Lynch
beneficially owned 738,526 PRIDES as of the close of business on April
15, 1998, Merrill Lynch nevertheless is not a class member and cannot
recover new PRIDES in connection with the Settlement." (JA577.)

                               3
out of "Opt Out Rights," then out of the rights of class
members with claims.3

The Notice also asserted:
         You also should know that the lead counsel
         appointment process included a court-mandated
         bidding process. This was intend to assur e that the
         largest possible portion of any recovery remained with
         participating class members, or conversely that
         qualified lead counsel took the least possible sums
         from the benefits to be obtained by participating class
         members. In Lead Counsel's view, under the fee
         mechanism proposed by Lead Counsel and described
         herein, there is a substantial likelihood that a
         substantial part, if not all, of the fees sought will be
         obtained from Unclaimed Rights and Opt Out Rights.
         As a consequence, in Lead Counsel's view, those Class
         Members who become Authorized Claimants will not
         have to pay any of Lead Counsel's fees, or if they do,
         there is a substantial likelihood that it will be less than
         the amount otherwise payable under the bids appr oved
         by the Court in the process of appointing lead counsel.

(JA247.)

On May 4, 1999, the Joanne A. Aboff Trust ("Trust") filed
several objections to the notice of settlement, all of which
pertained to Kirby's representation and fee request,4 as well
_________________________________________________________________

3. The settlement consisted of 29,161,474 Rights. After subtracting the
attorneys' fees and expenses for Lead Counsel, 27,308,617 Rights
remained. Proofs of Claim were filed with respect to 26,606,422 Rights,
of which 22,502,782 Rights were validated by the claims administrator
as of August 18, 1999. (Kirby Aff., Ex. L, atP 2.) Pursuant to the
settlement agreement, the unclaimed Rights that were not used to pay
Kirby for its fees and expenses were to be canceled by Cendant. Because
the total amount of Rights requested in the Pr oofs of Claim (26,606,422
Rights) was less than the amount of the settlement, after subtracting the
amount to be given to Kirby (1,650,680 Rights, valued at $19,329,463),
no claiming class members have had or will have their recovery reduced
by the fees and expenses taken by Kirby.

4. The Trust's objections concerned: 1) a "confidential Supplemental
Agreement" between lead plaintiff and Cendant which was included in

                               4
as a notice of its intention to appear at the settlement
hearing. (JA38-78.) At the settlement hearing on May 18,
1999, lead counsel stated that "[t]her e is no objection to the
settlement," (JA736), and the Trust's attor neys objected
only to selection of class counsel and Kirby's r equest for
attorneys' fees.

On June 15, 1999, the District Court signed an Opinion
and Order approving the settlement, stating: "The Court
considers the settlement to be eminently fair and
reasonable. The class is made completely whole by such
compensation. There are no objections voiced to the
settlement--only to the request for attor ney fees. The
proposed settlement is approved subject to the following
modifications to the attorneys' fees." In re Cendant Corp.
PRIDES Litig., 51 F.Supp.2d 537, 541 (D.N.J. 1999).

The District Court granted Kirby's request for expenses,
finding that the requested expenses of $2,367,493 were
"reasonable and necessary to the prosecution of this
litigation." 51 F.Supp.2d at 542. Then the Court found that,
for attorneys' fees, Kirby should receive a number of Rights
equivalent to 5.7% of the balance of Rights r eceived by the
Class. That percentage amounts to 1,650,680 Rights,
valued at approximately $19,329,463. The District Court
directed "Lead Counsel to seek to satisfy payment of these
awards of expenses and fees from any unclaimed Rights.
Then, and only then, to the extent that such fees and
expenses have not been satisfied by unclaimed Rights, shall
any deficiency be assessed against and bor ne by the class."
51 F.Supp.2d at 542. The Court went on to instruct that
"[a]ny rights unclaimed after authorized class claimants
_________________________________________________________________

the Settlement but not published and apparently contained information
about Cendant's and Lead Plaintiff 's obligations under the Settlement;
and 2) "lead counsel's excessive fee request." (JA39-40.) The Trust
argued, inter alia, that "[t]he combination of this unusual confidential
agreement with Lead Counsel's excessive fee r equest . . . multiplies the
potential that the class and the public will suspect that the settlement
contains a collusive or improper provision by which Lead Plaintiff, Lead
Counsel, and/or Cendant will benefit at the expense of the class."
(JA46.) The text of this "Supplemental Agr eement" does not appear in the
record, nor can we tell if it was discussed in the Notice.

                                5
and Lead Counsel have been issued their entitled Rights
shall be canceled by Cendant Corporation." 51 F .Supp.2d
at 542.

On June 15, 1999, the District Court entered an Order
and Judgment5 certifying the PRIDES class for settlement,
approving the settlement "and the distribution of Rights
and New PRIDES to Authorized Claimants set forth
therein," dismissing with prejudice all settled claims, and
awarding Lead Counsel 1,650,680 Rights as r easonable
attorneys' fees and 202,177 Rights as r eimbursement of
Lead Counsel's reasonable expenses. (JA728-30.) On the
same date and as part of its opinion, the District Court
denied the Trust's application for attor neys' fees. On July
22, 1999, the Trust timely appealed the District Court's
June 15 Orders and Judgment.

We have jurisdiction over this appeal pursuant to the
final order doctrine of 28 U.S.C. S 1291, and we review the
District Court's award of attorneys' fees for an abuse of
discretion, "which can occur `if the judge fails to apply the
proper legal standard or to follow pr oper procedures in
making the determination, or bases an awar d upon findings
of fact that are clearly erroneous.' " Zolfo, Cooper & Co. v.
Sunbeam-Oster Co., 50 F.3d 253, 257 (3d Cir. 1995)
(quoting Electro-Wire Prods., Inc. v. Sirote & Permutt, P.C. (In
re Prince), 40 F.3d 356, 359 (11th Cir. 1994)).

On August 27, 1999, Kirby filed a Motion in this court to
dismiss the Trust's appeal for lack of standing, as well as
presenting the standing issue in its appellate brief.

I.

Before we consider the merits of the Trust's appeal, a
threshold question must be answered: does the Trust have
standing to challenge the District Court's awar d of
attorneys' fees to Kirby? See Steel Co. v. Citizens for a
Better Env't, 523 U.S. 83, 94-95 (1998) (stating that "[t]he
requirement that jurisdiction be established as a threshold
_________________________________________________________________

5. The District Court judge signed both the Opinion and the Order and
Judgment on June 15, 1999, but the Opinion was filed on June 16,
1999 and the Order and Judgment was filed on June 24, 1999.

                               6
matter `spring[s] from the natur e and limits of the judicial
power of the United States' and `is inflexible and without
exception' "). Because "the core component of standing is an
essential and unchanging part of the case-or -controversy
requirement of Article III," Lujan v. Defenders of Wildlife,
504 U.S. 555, 560 (1992), we may not hear this appeal if
the Trust does not have standing.

"Ordinarily, only a party aggrieved by a judgment or
order of a district court may exercise the statutory right to
appeal therefrom. A party who receives all that he has
sought generally is not aggrieved by the judgment af fording
the relief and cannot appeal from it." Deposit Guar. Nat'l
Bank v. Roper, 445 U.S. 326, 333 (1980) (emphasis added).
In Ace Heating & Plumbing Co. v. Crane Co., the Third
Circuit explicated the application of this principle to class
actions, holding: "aggrieved class members may appeal any
final order of a district court in pr oceedings held pursuant
to Rule 23. This general proposition holds true even though
such class members have the right to exclude themselves
from the class." 453 F.2d 30, 32 (3d Cir. 1971) (emphasis
added).

The standing question in this case is troublesome,
because it appears as if the PRIDES settlement has
provided the class members with full recovery and because
any reduction in the amount of attorneys' fees to Kirby will
not be distributed among the class members, but instead
those rights will be returned to and canceled by Cendant.
Therefore, Kirby argues, the T rust is not aggrieved by the
award of attorneys' fees and has no standing to appeal.

While this argument admittedly has a superficial
attraction because the PRIDES class members will
seemingly recover a "dollar-for -dollar" return for their
claims and Kirby's fees will not reduce their r ecovery, we
nevertheless hold that the Trust does have standing to
appeal the award of attorneys' fees. 6 We base this holding
on two related concepts: 1) the nature of the relationship
between class plaintiffs, class counsel, and defendants in
_________________________________________________________________

6. Our holding that the Trust has standing to appeal disposes of the
motion made by Kirby on August 27, 1999 to dismiss the Trust's appeal.
We will deny that motion.

                               7
class actions requires that the "aggrieved" requirement be
construed broadly in class action cases; and 2) the
judiciary's independent authority over the appointment of
class counsel, the grant of attorneys' fees, and the review of
attorneys' fee awards in class actions. In connection with
these two principles, we require that district courts conduct
an extensive analysis and inquiry before deter mining the
amount of fees, because we have an independent inter est in
monitoring district courts' fee awards, particularly those
awards stemming from Rule 23 class actions. See, e.g.,
Zucker v. Occidental Petroleum Corp., 192 F.3d 1323, 1328
(9th Cir. 1999); see generally Advisory Committee's Notes
on Fed. R. Civ. P. 23, 28 U.S.C., Notes following Rule 23
(addressing, inter alia, "the question of the measures that
might be taken during the course of the action to assure
procedural fairness"). Indeed, we ar e in effect third parties
to the fee award process, albeit silent parties for the most
part until the award is finalized and r eviewed.

A.

Ostensibly, lead class counsel represents all class
plaintiffs. However, in attempting to settle a large class
action, class counsel must often spend more time
negotiating with and interacting with the defendants than
with their own clients. This situation presents several
dangers. First, as we observed in Prandini v. National Tea
Co., "a defendant is interested only in disposing of the total
claims asserted against it[, and] the allocation between the
class payment and the attorneys' fees is of little or no
interest to the defense." 557 F.2d 1015, 1020 (3d Cir.
1977). Moreover, the "divergence in [class members' and
class counsel's] financial incentives . . . cr eates the `danger
. . . that the lawyers might urge a class settlement at a low
figure or on a less-than-optimal basis in exchange for red-
carpet treatment for fees.' " In r e General Motors Corp. Pick-
Up Truck Fuel Tank Prod. Liab. Litig. (hereinafter "In re GM
Trucks"), 55 F.3d 768, 820 (3d Cir. 1995) (quoting
Weinberger v. Great Norther n Nekoosa Corp., 925 F.2d 518,
524 (1st Cir. 1991).

This unique relationship among plaintif fs' counsel,
plaintiffs, and defendants in class actions imposes a special

                               8
responsibility upon appellate courts to hear challenges to
fee awards by class members whose claims may have been
reduced or in some way affected in exchange for large fee
awards. See In re GM Trucks , 55 F.3d at 819-21. This is so
even in this case, where the Trust pr esumably will not
benefit from a reduction in Kirby's attorneys' fees, because
the PRIDES settlement was structured so that any
remaining Rights will be returned to Cendant.

The Ninth Circuit addressed a similar situation in Zucker
v. Occidental Petroleum Corp., 192 F .3d 1323 (9th Cir.
1999), pointing out in its discussion that, even where the
plaintiff "gets the same money whether the fee is cut or not,
. . . a client whose attorney accepts payment, without his
consent, from the defendants he is suing, may have a
remedy, and this remedy may extend to a plaintiff class
whose class attorneys accept payment fr om the defendants
the class is suing." 192 F.3d at 1326.

The Ninth Circuit took this reasoning a step further in
Lobatz v. U.S. West Cellular of Calif., in which the court,
holding that a class member had standing to appeal an
attorneys' fee award "even though that award was payable
independent of the class settlement," stated:

         If . . . class counsel agreed to accept excessive fees and
         costs to the detriment of class plaintiffs, then class
         counsel breached their fiduciary duty to the class[,
         and] any excessive award could be consider ed property
         of the class plaintiffs, and any injury they suffered
         could be at least partially redressed by allocating to
         them a portion of that award.

Lobatz, 222 F.3d 1142, 1147 (9th Cir . 2000).

Under the Ninth Circuit's analysis, ther efore, the Trust
need not benefit from a reduction in Kirby's fee to have
standing to appeal. Moreover, the Ninth Circuit suggested
in Zucker that the requirement that class plaintiffs be
aggrieved should be construed broadly, citing Judge
Sneed's observation in his dissent in In r e First Capital
Holdings "that `[a]rguably, a class member always retains
an interest in attorney fees, even when her claims have
been met in full.' " Zucker, 192 F .3d at 1328 (quoting In re

                               9
First Capital Holdings Corp. Fin. Prods. Sec. Litig., 33 F.3d
29, 31 (9th Cir. 1994) (Sneed, J., dissenting).

As a class member, the Trust was eligible to receive "one
Right, a marketable security freely tradeable until February
14, 2001, having the terms described her ein for each
Income PRIDES and Growth PRIDES ($50.00 face amount)
beneficially owned by Class members at the close of
business on April 15, 1998 if such Class member submits
a valid and timely proof of claim form." (JA239.) The Notice
of the Proposed Settlement stated that "[e]ach Right will be
designed to have a stated or theoretical value of $11.71,"
but acknowledged that "the Rights may trade in the market
at a price below their theoretical value." (JA239.) Moreover,
the Notice stated that "Cendant believes that r ecoverable
damages (if any) per share could be lower or higher than
the per PRIDES damages estimated by lead counsel for the
Class." (JA239.)7

Though Kirby asserts that each class member r eceived
full recovery from this settlement, in which case, it is
contended, the Trust would not be aggrieved by the fee
award, the description of the settlement in the Notice and
its ultimate implementation by class members is uncertain
as to class members' actual recovery. Because class
members received rights which must be traded on the
market to be liquidated, a number of factors could
contribute to class members not receiving the theoretical
$11.71 per Right. It is noteworthy that the settlement
provided class members with no immediate cash payment,
but rather left class members in the position of r elying on
the marketability of their new Rights for reimbursement of
their claims. That reliance, apart from any other market
risks, might itself be chancy in light of Cendant's history of
"accounting irregularities" and in light of the recent market
and economy slow down.
_________________________________________________________________

7. The settlement, as noted above, provides for Rights which are "freely
tradeable until February 14, 2001," which date has passed. The record
does not disclose whether all the claimed Rights have been traded or the
actual value of those Rights. Hence, because the r ecord is silent and the
settlement itself has not been challenged on this appeal, we do no more
than call attention to that aspect of the settlement.

                               10
Nor does even a "dollar-for-dollar" recovery in cash
undermine our power and jurisdiction and our special
responsibility to review fee awards. Indeed, though the fact
of market fluctuation and its effect on the value of class
members' recovery influences our decision that the Trust
has standing, we are equally convinced of our appellate
jurisdiction over class settlements in which plaintiffs
received a "dollar-for-dollar" recovery in cash. Indeed, it
would be preposterous to hold that, even where a district
court awarded a fee of 75% of the recovery to class counsel,
we would have no power to review such an inappr opriate
and outrageous award in the absence of an objector whose
claims had been directly reduced as a r esult of the award.
Our oversight and supervisory function would necessarily
come into play to correct such a decree. This duty of review
with which we are vested will be discussed in more detail
in the next section.

B.

As indicated above, we are convinced of our obligation to
vacate the District Court's order awarding fees by the
special position of the courts in connection with class
action settlements and attorneys' fee awar ds. As we
observed in In re GM Trucks,"a thorough review of fee
applications is required in all class action settlements." 55
F.3d at 819. Specifically, the danger inher ent in the
relationship among the class, class counsel, and
defendants "generates an especially acute need for close
judicial scrutiny of fee arrangements" in class action
settlements.8 55 F.3d at 820. In discussing this duty of
_________________________________________________________________

8. We should make clear that we do not attribute any motives or designs
to Kirby that would indicate any conflict by Kirby with its responsibility
to the class, nor do we mean to intimate that Kirby acted improperly.
Indeed, as the District Court found and we have no r eason to dispute,
Kirby discharged its function as lead counsel in exemplary fashion. The
cautions we express, which are present in the unique context of class
actions and the fee awards which arise in this context, pertain solely to
the issue of whether, where class members have apparently received
dollar-for-dollar recovery, standing is available for an objector to a fee
award. For all the reasons we express here, we are satisfied that it is.

                               11
district courts to oversee class settlements in In re GM
Trucks, we explained:

         the court's oversight task is considerably complicated
         by the fact that these attorney-class conflicts are often
         difficult to discern in the class action context, "where
         full disclosure and consent are many times difficult
         and frequently impractical to obtain." Finally, we
         emphasize that the court's oversight function serves
         not only to detect instances of "the actual abuse[that
         potential attorney-class conflicts] may cause, but also
         [the] potential public misunderstandings they may
         cultivate in regard to the interests of class counsel."

55 F.3d at 820 (quoting In re Agent Orange Prod. Liab.
Litig., 818 F.2d 216, 224, 225 (2d Cir . 1987)). In other
words, we indicated in In re GM T rucks the importance of
the judicial role in finalizing class action settlements, and
we suggested that this importance derived fr om general
concerns about "potential public misunderstandings" as
much as from a desire to protect the plaintiffs in the
particular class.

In Zucker, in asserting that the district court was
required to review the award of attorneys' fees regardless of
whether anyone had standing to challenge the awar d, the
Ninth Circuit stated:

         In a class action, whether the attorneys' fees come
         from a common fund or are otherwise paid, the district
         court must exercise its inherent authority to assure
         that the amount and mode of payment of attor neys'
         fees are fair and proper. This duty of the court exists
         independently of any objection. Therefor e it exists, a
         fortiori, regardless of whether an objector has a
         remediable economic stake in the court's decision.
         Because the district court had the authority and duty
         to pass upon the fairness of the attor neys' fees
         settlement independently of whether there was
         objection, we need not decide whether the objector had
         standing.

192 F.3d at 1328-29.

The court in Zucker further explained that"[n]o Article III
case or controversy is needed with regar d to attorneys' fees

                               12
as such, because they are but an ancillary matter over
which the district court retains equitable jurisdiction." 192
F.3d at 1329. The Ninth Circuit found support for this
proposition in the reasoning of the Eighth Circuit that
"because `the reasonableness of attor neys' fees is within the
overall supervisory authority' of the court in a class action,
the court did not need to reach the question of whether an
objector has standing." Zucker, 192 F .3d at 1329 (quoting
Grunin v. Int'l House of Pancakes, 513 F .2d 114, 127 n.13
(8th Cir. 1975)).

While the statements in In re GM T rucks and Zucker refer
to the authority of district, not appellate, courts in
connection with class action settlements, the cases make
clear that reviewing courts retain an interest--a most
special and predominant interest--in the fairness of class
action settlements and attorneys' fee awar ds. Accordingly,
our interest as a reviewing court in ensuring that district
courts fulfill their obligations and comply with the
instructions and guidelines in this area bolsters our
determination that the Trust has standing to challenge
Kirby's fee award.

Nor is our responsibility in connection with class action
matters restricted to reviewing the final fee determination
made by the District Court. Our interest and supervisory
role is pervasive and extends not only to thefinal fee award
but also to the manner by which class counsel is selected
and the manner by which attorneys' fee conditions are
established.

Here, the District Court employed a sealed-bid auction to
select class counsel. That process, which occurred virtually
at the inception of the instant class action, is itself fee-
driven. As such, it invites, indeed requir es, judicial
examination and, hence, our jurisdiction. This is so both
because of the unique relationship between class members,
class counsel, and the defendants in class actions and
because of our strong interest in the fair ness of class
settlements and the cost of achieving such settlements.
See, e.g., John C. Coffee, Jr., National Law Journal, Sept.
14, 1998, at B6 (discussing selection of lead counsel
through auctions and "bidding rules").

                               13
Because it is the district court's function to participate in
the litigation process in this way, as the District Court did
here, and because, as noted, our judicial scrutiny reaches
to all corners of the class action process including the
selection of class counsel--a selection which impacts on the
final fee award and fairness of the settlement--we would be
remiss if we failed to exercise our jurisdiction in this area.

An analogy, albeit one that is far afield fr om class action
fees, is helpful to illustrate and emphasize the court's
interest and the role that our inter est plays in our decision
to hear this appeal. In Powers v. Ohio, a post-Batson case,9
the Supreme Court held that a white criminal defendant
had standing to object to and appeal the exclusion of black
jurors through peremptory challenges, even though the
defendant and the potential jurors were of different races.
499 U.S. 400 (1991). In its discussion of standing, the
Court stated:

         The discriminatory use of peremptory challenges by the
         prosecution causes a criminal defendant cognizable
         injury, and the defendant has a concrete inter est in
         challenging the practice. This is not because the
         individual jurors dismissed by the prosecution may
         have been predisposed to favor the defendant; if that
         were true, the jurors might have been excused for
         cause. Rather, it is because racial discrimination in the
         selection of jurors "casts doubt on the integrity of the
         judicial process," and places the fair ness of a criminal
         proceeding in doubt.

Powers, 499 U.S. at 411 (internal citations omitted).

Likewise, just as discriminatory selection of jur ors "casts
doubt on the integrity of the judicial process" such that the
defendant in Powers had standing to appeal, the integrity
and fairness of class settlements is thr eatened by excessive
attorneys' fee awards such that class plaintiffs have
_________________________________________________________________

9. In Batson v. Kentucky, 476 U.S. 79 (1986), the Supreme Court "held
that a [black] defendant can raise an equal pr otection challenge to the
use of peremptories at his own trial by showing that the prosecutor used
them for the purpose of excluding members of the defendant's race."
Powers v. Ohio, 499 U.S. at 405 (citing Batson, 476 U.S. at 96).

                               14
standing to challenge excessive fee awards, even when they
have received dollar-for-dollar r ecovery in the class
settlement.

Because of the possible injury to the Trust as well as
other class members from the fee award in this case and,
more importantly, because of our overar ching interest in
class fee awards, we therefore hold that the Trust has
standing to appeal the fee award. Accor dingly, we now turn
to the fee award that the District Court granted to Kirby
and review that award for an abuse of discretion. See In re
GM Trucks, 55 F.3d 768, 782 (3d Cir . 1995).

II.

There are two primary methods for calculating attorneys'
fees: the percentage-of-recovery method 10 and the lodestar
method.11 "The per centage-of-recovery method is generally
favored in cases involving a common fund,12 and is
designed to allow courts to award fees fr om the fund `in a
manner that rewards counsel for success and penalizes it
for failure.' " In re Prudential, 148 F.3d at 333. "The lodestar
method is more commonly applied in statutory fee-shifting
cases, and is designed to reward counsel for undertaking
_________________________________________________________________

10. This method has been described as follows:"The percentage of
recovery method resembles a contingent fee in that it awards counsel a
variable percentage of the amount recover ed for the class." In re GM
Trucks, 55 F.3d 768, 819 n.38 (3d Cir. 1995).

11. The lodestar method was initially set forth in Lindy Bros. Builder,
Inc.
of Philadelphia v. American Radiator & Standar d Sanitary Corp., 487
F.2d 161 (3d Cir. 1973), appeal following remand, 540 F.2d 102 (3d Cir.
1976). As this court explained in Gunter v. Ridgewood Energy Corp., "[a]
court determines an attorney's lodestar by multiplying the number of
hours he or she reasonably worked on a client's case by a reasonable
hourly billing rate for such services given the geographical area, the
nature of the services provided, and the experience of the lawyer." 223
F.3d 190, 195 n.1 (3d Cir. 2000).

12. "[T]he common-fund doctrine . . . allows a person who maintains a
lawsuit that results in the creation, pr eservation, or increase of a fund
in which others have a common interest, to be r eimbursed from that
fund for litigation expenses incurred." Court Awarded Attorney Fees,
Report of the Third Circuit Task Force, 108 F.R.D. 237, 241 (1985)
(hereinafter "Task Force Report").

                                15
socially beneficial litigation in cases wher e the expected
relief has a small enough monetary value that a
percentage-of-recovery method would pr ovide inadequate
compensation." 148 F.3d at 333.

The total settlement in this case was valued at
$341,500,000, and the District Court granted attor neys'
fees in the amount of $19,329,463.13 As the District Court
noted, this amount constitutes 5.7% of the class's total
recovery. In connection with the lodestar calculation, the
District Court observed that "Lead Counsel, thr ough its
principal partners, associates, and paralegals expended
approximately 5,600 hours, and its senior partners have a
regular hourly rate of $495." 51 F.Supp.2d at 542. Using
the $495 hourly rate, the lodestar multiplier14 for the
District Court's fee award is 7.15

Two primary principles govern our review of the District
Court's fee award to Kirby: 1) did the District Court provide
sufficient explanation for granting the fee awar d of $19.3
million?; and 2) was the award so unreasonably high that
the District Court abused its discretion in granting that
amount in attorneys' fees?
_________________________________________________________________

13. Kirby's ceiling for fees, as explained in the Notice of Settlement,
was
ten percent of the total settlement. The settlement was calculated at
$341.5 million, ten percent of which would be $34,150,000. That figure
was reduced by the District Court to $19,329,463.

14. The Task Force Report explained that, after the lodestar is
calculated, "[t]he `lodestar' then could be increased or decreased based
upon the contingent nature or risk in the particular case involved and
the quality of the attorney's work. An incr ease or decrease of the
lodestar
amount is referred to as a `multiplier.' " Task Force Report, 108 F.R.D.
237, 243.

15. 5,600 hours x $495 = 2,772,000. $19,329,463 divided by 2,772,000
= 6.97. This multiplier of 7 essentially comports with the information
provided by Kirby after oral argument. In that letter, Kirby stated that
"the blended hourly compensation to ourselves and those law firms who
were working with us was approximately $3,300." (Dec. 19, 2000 Kirby
Letter, at 2.) $3,300 divided by $495 = 6.67, only slightly less than the
6.97 multiplier calculated from the figur es provided by the District
Court.

                                16
A.

In Gunter v. Ridgewood Energy Corp., we considered a
district court's award of attorneys' fees in a class action
settlement. 223 F.3d 190 (3d Cir. 2000). That case involved
a $9.5 million settlement, out of which the district court
allowed attorneys' fees amounting to 18% of the settlement
fund, significantly less than the one-thir d requested by the
attorneys. 223 F.3d at 191. The district court in Gunter
explained its decision as follows: "The natur e of this
litigation, its resolution at this stage without the necessity
of trial, the nature of the settlement, and its value, convince
the court that it would place a reasonable bur den on the
class to award attorneys' fees of 18% of the Settlement
Fund, or $1,700,000." 223 F.3d at 192 (citing Gunter v.
Ridgewood Energy Corp., Civ. No. 95-438 (WHW), at 3
(D.N.J. Nov. 16, 1999)). The attorneys appealed the district
court's reduction of their fee request.

In reviewing the district court's fee awar d in Gunter, we
stated that "[w]e give [a] great deal of deference to a district
court's decision to set fees." 223 F.3d at 195. However, we
noted, "[n]otwithstanding our deferential standard of
review, it is incumbent upon a district court to make its
reasoning and application of the fee-awar ds jurisprudence
clear, so that we, as a reviewing court, have a sufficient
basis to review for abuse of discretion." 223 F.3d at 196.
Therefore, "if the district court's fee-award opinion is so
terse, vague, or conclusory that we have no basis to review
it, we must vacate the fee-award order and remand for
further proceedings." 223 F.3d at 196. In addition, "if a
district court does not fulfill its duty to apply the relevant
legal precepts to a fee application, it abuses its discretion
by not exercising it." 223 F.3d at 196.

In Gunter, we vacated the district court's fee award
because the district court "dealt with the fee-award issue in
a cursory and conclusory fashion" and did not employ the
factors which this Court has stated that district courts
should consider in awarding fees using the per centage-of-
recovery method in common-fund class actions. See Gunter,
223 F.3d at 196-97. These factors wer e set forth in Gunter
in a footnote:

                               17
         Among other things, these factors include: (1) the size
         of the fund created and the number of persons
         benefitted; (2) the presence or absence of substantial
         objections by members of the class to the settlement
         terms and/or fees requested by counsel; (3) the skill
         and efficiency of the attorneys involved; (4) the
         complexity and duration of the litigation; (5) the risk of
         nonpayment; (6) the amount of time devoted to the
         case by plaintiffs' counsel; and (7) the awar ds in
         similar cases.

Gunter, 223 F.3d at 195 n.1 (citing In re Prudential, 148
F.3d 283, 336-40 (3d Cir. 1998); In re GM Trucks, 55 F.3d
768, 819-22 (3d Cir. 1995)).

As in Gunter, the District Court's fee opinion in this case
was too cursory for us to "have a sufficient basis to review
for abuse of discretion." Gunter, 223 F.3d at 196. The
District Court did not even specify whether it was using the
percentage-of-recovery method or the lodestar method to
set attorneys' fees. Nor, if the District Court intended to
utilize the lodestar method, did it calculate the lodestar
multiplier. Rather, the District Court, in a conclusory
paragraph bereft of analysis, stated:

         This Court has examined the time expended by Lead
         Counsel and the regular hourly rates of its services.
         Lead Counsel, through its principal partners,
         associates, and paralegals expended approximately
         5,600 hours, and its senior partners have a r egular
         hourly rate of $495. This represents significant effort.
         But the Court is more impressed by the quality of
         result than the quantity of effort. The class will receive
         its full entitlement. And resolution of this matter was
         greatly accelerated by the creative dynamism of
         counsel. For this, counsel should not be penalized by
         a slavish application of the lodestar. W e have seen the
         gifted execution of responsibilities by a lead counsel.

51 F.Supp.2d at 542. Despite the District Court's obvious
dissatisfaction with the lodestar method, the court did not
even address the percentage-of-recovery method, except to
the extent that it calculated that the fee awar d constituted
5.7% of the total class recovery.

                               18
The percentage-of-recovery method has long been used in
this Circuit in common-fund cases. Indeed, in the 1985
Third Circuit Task Force r eport entitled Court Awarded
Attorney Fees, the Task Force discussed the problems with
the lodestar method in detail. "Accordingly, the Task Force
recommend[ed] that in the traditional common-fund
situation . . . , the district court . . . should attempt to
establish a percentage fee arrangement." Task Force Report,
108 F.R.D. 237, 255 (1985). Since that time, we have
several times reaffirmed that application of a percentage-of-
recovery method is appropriate in common-fund cases. See,
e.g., Gunter v. Ridgewood Energy Corp. , 223 F.3d 190, 195
n.1 (3d Cir. 2000); Brytus v. Spang & Co. , 203 F.3d 238,
243 (3d Cir. 2000); In re Prudential, 148 F.3d 283, 333-34
(3d Cir. 1998); In re GM Trucks, 55 F.3d 768, 821 (3d Cir.
1995).

Though this is not a traditional common-fund case,
because the unclaimed portion of the settlement fund is
returned to Cendant and because the plaintiffs who recover
may not be affected by the attorneys' fee award (depending
on the number of plaintiffs who recover rights from the
fund), use of the percentage-of-recovery method is
appropriate in this case. Since the District Court
highlighted the inadequacy of the lodestar method, it can
be assumed that that court also perceived that the
percentage method was a better method of calculating
attorneys' fees in this case. This is consistent with the
District Court's opinion awarding attor neys' fees in the
larger and separate Cendant settlement, in which it did
declare, "[f]ollowing established Thir d Circuit law . . . , the
Court will award fees by a percentage-of-r ecovery method."
In re Cendant Corp. Litig., 109 F .Supp.2d 285, 298 (D.N.J.
2000).16
_________________________________________________________________

16. By referring to the District Court's method of calculating attorneys'
fees in the separate Cendant case (see text at p. 2, supra, where we
noted that the PRIDES shareholders were to be represented separately
from the primary Cendant class), we by no means indicate that the fees
awarded to the primary Cendant class wer e a proper exercise of the
District Court's discretion. We leave that determination to the panel of
this court assigned to review that fee awar d.

                               19
As discussed above, we have articulated at least seven
factors to be considered by district courts in setting
percentage fee awards in common fund cases. See Gunter,
223 F.3d 190, 195 n.1 (3d Cir. 2000). The District Court,
however, did not explicitly consider any of these factors.17 In
addition to rejecting the lodestar method, the District Court
stated: "The Court appreciates Lead Counsel's verve and
the eminently satisfactory results it obtained for the class.
There are no objections to the settlement agreement." 51
F.Supp.2d at 541. In addition, the District Court mentioned
the initial sealed bidding process and r eferred to the
resulting bid to which Kirby agreed "as a benchmark of
reasonableness." 51 F.Supp.2d at 542 (quoting In re
Cendant Corp., 182 F.R.D. 144, 152 (D.N.J. 1998).
However, when it came to setting the fee awar d, the District
Court said simply, "[t]he Court deter mines that counsel fees
of 5.7% of this net balance [of the total awar d less Lead
Counsel's expenses of $2,367,493] are r easonable." 51
F.Supp.2d at 542.

It could be argued that, in the few terse statements
quoted above, the District Court took into account three of
the seven Gunter factors: "the pr esence or absence of
substantial objections by members of the class to the
settlement terms and/or fees requested by counsel"; "the
skill and efficiency of the attorneys involved"; and "the
amount of time devoted to the case by plaintif fs' counsel."
Gunter, 223 F.3d at 195 n.1. However , the District Court
brushed over our required analysis of those factors in
setting the attorneys' fees.

Significantly, the District Court did not consider at all the
other factors which we deem to be more important in this
case, namely "the complexity and duration of the litigation"
and "the [range of] awards in similar cases." 223 F.3d at
_________________________________________________________________

17. We recognize that our decision in Gunter was issued after the District
Court ruled on the settlement and fee application in this case and that,
therefore, the District Court could not have been informed in its decision
by our holding in Gunter. However, all of the principles enunciated in
Gunter have been announced by this court befor e, in cases predating the
District Court's decision on appeal here. See, e.g., In re Prudential, 148
F.3d 283, 336-40 (3d Cir. 1998); In re GM Trucks, 55 F.3d 768, 819-22
(3d Cir. 1995)

                               20
195 n.1 (emphasis added). Nor does it appear that the
District Court "cross-check[ed] the percentage award . . .
against the `lodestar' award method," which is "suggested"
practice for district courts setting fee awar ds by the
percentage-of-recovery method. Gunter , 223 F.3d at 195
n.1. Further, the District Court did not"make its reasoning
and application of the fee-awards jurisprudence clear."
Gunter, 223 F.3d at 196.18

B.

Because the District Court failed to consider the Gunter
factors that we deem essential to a proper exer cise of
discretion and to an appropriate consideration of attorneys'
fee awards, we will discuss those factors her e.

1. Complexity and Duration of Litigation

In April 1998, Cendant announced past accounting
irregularities and stated that its financial statements for
certain past years would be restated. 51 F .Supp.2d at 539.
On behalf of the Cendant PRIDES class, Kirby filed an
Amended and Consolidated Class Action Complaint on
November 11, 1998, accompanied by a motion for class
certification, a motion for summary judgment, and a motion
for preliminary injunctive relief. Less than two months
later, on January 7, 1999, the parties announced that they
had reached "an agreement in principal[sic]," and the
parties presented a proposed settlement agreement to the
District Court on March 17, 1999. 51 F.Supp.2d at 540.

As the District Court observed, "[t]his stage of the
_________________________________________________________________

18. The District Court did indicate in its opinion that it was using the
bid to which Kirby had agreed "as a benchmark of reasonableness" in
setting the fee. 51 F.Supp.2d at 541. However , a preliminary bidding
process cannot replace subsequent analysis of the factors listed in
Gunter. The circumstances and progression of every case are different,
and these unique factors must be taken into account by district courts
awarding attorneys' fees. Therefor e, though the result of a bidding
process may be of use to a district court in awarding fees at the end of
the case, it cannot supplant post-settlement analysis to determine a
reasonable fee.

                               21
litigation, notwithstanding that Lead Counsel has moved for
summary judgment, is what would be normally the
discovery period, very early on in the litigation." 51
F.Supp.2d at 541. The District Court also noted that Kirby
spent approximately 5,600 hours on this action.

In setting Kirby's fee award, the District Court apparently
turned a blind eye to the following factors: 1) the case was
relatively simple in terms of proof, in that Cendant had
conceded liability and no risks pertaining to liability or
collection were pertinent; 2) the case was settled at a very
early stage of the litigation, with an agreement being
announced two months after Kirby filed for class
certification and a proposed settlement being submitted to
the District Court two months after that; 3) ther e was a
minimal amount of motion practice in this case--before
settlement, Kirby submitted only the Complaint and three
motions, all on the same day; 4) discovery was virtually
nonexistent--indeed the District Court did not mention any
depositions taken or document review conducted by Kirby;
and 5) Kirby spent a relatively small amount of time on this
case compared to the amount of time expended in most
other large class actions.

2. Range of Awards

Before reviewing specific awards in other large class
settlements, we will review generally the range of attorneys'
fee awards in common fund settlements of class actions. In
In re GM Trucks, we observed that "[o]ne court has noted
that the fee awards have ranged from nineteen percent to
forty-five percent of the settlement fund." 55 F.3d 768, 822
(3d Cir. 1995) (citing In re Smithkline Beckman Corp. Sec.
Litig., 751 F. Supp. 525, 533 (E.D. Pa. 1990)). We also
noted in In re Prudential that "[t]he district court . . .
examined the fee awards in class actions with r ecoveries
exceeding $100 million and found the fee per centages
ranged from 4.1% to 17.92%." 148 F.3d 283, 339 (3d Cir.
1998).

However, recently two district courts in this Circuit have
declined to follow this court's statement of the range in In
re Prudential, stating that "the cases cited in [In re

                               22
Prudential] were all decided at least thirteen years ago." In
re Ikon Office Solutions, Inc. Sec. Litig. , 194 F.R.D. 166, 196
(E.D. Pa. 2000); In re Orthopedic Bone Screw Prod. Liab.
Litig., 2000 WL 1622741, at 7 (E.D. Pa. Oct. 23, 2000).
Indeed, in another Cendant opinion dealing with attorneys'
fees, this same District Court stated that, in cases surveyed
by lead counsel, "[a]wards . . . ranged from a low of 20% in
the case with a $200 million recovery to a high of 33.3% for
cases with recoveries of $77.5 million and $110 million." In
re Cendant Corp. Sec. Litig., 109 F .Supp.2d 285, 290
(D.N.J. 2000). These varying ranges of attor neys' fees
confirm that a district court may not r ely on a formulaic
application of the appropriate range in awar ding fees but
must consider the relevant circumstances of the particular
case.

One important consideration is the size of the settlement.
The Task Force Report stated, with r eference to fee awards
in common fund cases: "The negotiated fee, and the
procedure for arriving at it, should be left to the court's
discretion. In most instances, it will involve a sliding scale
dependent upon the ultimate recovery, the expectation
being that, absent unusual circumstances, the percentage
will decrease as the size of the fund incr eases." 108 F.R.D.
237, 256 (1985). We called attention to this statement in In
re Prudential, explaining that "[t]he basis for this inverse
relationship is the belief that `[i]n many instances the
increase [in recovery] is mer ely a factor of the size of the
class and has no direct relationship to the efforts of
counsel.' " In re Prudential, 148 F.3d at 339 (quoting In re
First Fidelity Bancorporation Sec. Litig., 750 F . Supp. 160,
164 n. 1 (D.N.J. 1990)). Accordingly, district courts setting
attorneys' fees in cases involving lar ge settlements must
avoid basing their awards on percentages derived from
cases where the settlement amounts were much smaller.

3. Other Awards

The District Court did not undertake to review the fees
granted in other class action settlement cases, particularly
in other large settlement cases, i.e., cases in which the
common fund exceeded $100 million.19 Had it conducted
_________________________________________________________________

19. A district court in this Circuit noted that "[c]ourts have generally
decreased the percentage awarded as the amount recovered increases,

                               23
such a review, the District Court should have looked
specifically at cases in which the percentage-of-recovery
method, not the lodestar method, was employed to set the
fee award, and it should have examined the r easoning
behind the district courts' fee awards in cases of similar
size.

Below, we have set forth a chart of fee awar ds given in
federal courts since 198520 in class actions in which the
settlement fund exceeded $100 million21 and in which the
percentage of recovery method was used. 22 We have
_________________________________________________________________

and $100 million seems to be the informal marker of a `very large'
settlement." In re Orthopedic Bone Scr ew Prod. Liab. Litig., 2000 WL
1622741, at 7 (E.D. Pa. Oct. 23, 2000).

20. In 1984, the Supreme Court observed in Blum v. Stenson that "[in]
the calculation of attorney's fees under the`common fund doctrine,' . . .
a reasonable fee is based on a percentage of the fund bestowed on the
class." 465 U.S. 886, 900 n.16 (1984). Subsequently, the Third Circuit
Task Force Report in 1985 outlined the pr oblems with the lodestar
method and recommended that courts use the per centage-of-recovery
method instead of the lodestar method in common fund cases. After this
instruction from the Supreme Court and the release of the Task Force
Report, courts across the country regularly employed the percentage
method to set fees in common fund cases.

21. Although we have emphasized the seven-factor analysis required in
class action fee cases set forth in Gunter v. Ridgewood Energy Corp., 223
F.3d 190, 195 n.1 (3d Cir. 2000), Gunter is not listed in this chart
because the settlement in that case was less than $100 million.

22. In several cases, the class settlement exceeded $100 million but the
lodestar method was used to determine attor neys' fees. See, e.g.,
McLendon v. Continental Group, Inc., 872 F. Supp. 142 (D.N.J. 1994)
(settlement was for more than $400 million, and lodestar multiplier of
1.5 was used to award attorneys' fees); In re Shell Oil Refinery Litig.,
155
F.R.D. 552 (E.D. La. 1993) ($170 million settlement and $31.8 million in
fees, which represented a 3.25 lodestar multiplier and approximately
18% of the total settlement); In re W ashington Public Power Supply Sys.
Sec. Litig., 779 F. Supp. 1056 (D. Ariz. 1991) ($687 million settlement,
$32 million in attorneys' fees, 1.2 lodestar multiplier, and attorneys'
fees
were 4.7% of total settlement); In r e Baldwin-United Corp. Litig., 1986
WL
12195 (S.D.N.Y. June 27, 1986) ($183.8 million settlement, $7.5 million
in attorneys' fees, lodestar multiplier of 2, and fees were 4.1% of total
settlement); In re "Agent Orange" Pr
                    od. Liab. Litig., 611 F. Supp. 1296
24
outlined the amount of settlement, the percentage of the
settlement that made up the attorneys' fee award and the
lodestar multiplier.

Case                                    Settlement         Fees as %
Lodestar
                                                           of Recovery
Multiplier

In re Cendant Corp. PRIDES Litig.,      $341.5 million     5.7%
7-10
51 F. Supp. 2d 537 (D.N.J. 1999)                           ($19.3 mil.)
The instant case under review here.

In re Cendant Corp. Litig.,             $3.16 billion      8.275%
32.7
109 F.Supp.2d 285 (D.N.J. 2000)                            ($262 mil.)

In re Auction Houses Antitrust Litig., $512 million        5.2%
Inf. not
2001 WL 170792 (S.D.N.Y. Feb. 22,                          ($27 mil.)
available
2001)

In re Orthopedic Bone Screw             $100 million       12%
Inf. not
Prod. Liab. Litig., 2000 WL 1622741
available
(E.D. Pa. Oct. 23, 2000)

In re Prudential,                       $1.8 billion       5%
2.13
106 F.Supp.2d 721 (D.N.J. 2000)23                          ($90 mil.)

In re Ikon Office Solutions, Inc. Sec. $111 million        30%
2.7
Litig., 194 F.R.D. 166 (E.D. Pa. 2000)

Shaw v. Toshiba America Inf. Sys.,      $2.1 billion       7%
Inf. not
Inc., 91 F.Supp.2d 942 (E.D. Tex. 2000)                    ($147 mil.)
available

In re Sumitomo Copper Litig.,           $116 million     27.5%
2.5
74 F.Supp.2d 393 (S.D.N.Y. 1999)                         ($32 mil.)
_________________________________________________________________

(E.D.N.Y. 1985), aff 'd in part 818 F.2d 226 (2d Cir. 1987) ($180 million
settlement, $10.7 million in attorneys' fees, lodestar multiplier of 1.25
to
1.75, and fees were 6% of settlement).
Additionally, it should be noted that the chart includes a substantial
number of the post-1985 cases involving large settlements and fees
granted as a percentage of the total settlement, but the chart is not
comprehensive. We feel that the selection of cases in the chart are
representative of the range of cases r elevant to the District Court's
analysis of Kirby's fee application in this case.

23. The district court originally awarded attorneys' fees in this case in
1997, see In re Prudential, 962 F . Supp. 572 (D.N.J. 1997), which
decision was vacated and remanded by the Thir d Circuit. See In re
Prudential, 148 F.3d 283 (3d Cir . 1998). Those decisions are discussed
infra.

                               25
Case                                       Settlement       Fees as %
Lodestar
                                                            of Recovery
Multiplier

Kurzweil v. Philip Morris Co., 1999 WL    $123.8 million    30%
2.46
1076105 (S.D.N.Y. Nov. 30, 1999)                            ($37.1 mil.)

In re Lease Oil Antitrust Litig.,         $190 million      25%
1.35
186 F.R.D. 403 (S.D. Tex. 1999)

In re Copley Pharm., Inc.,                $150 million      13%
2
1 F.Supp.2d 1407 (D. Wyo. 1998)                             ($19.5 mil.)

In re PaineWebber Ltd. P'ships Litig. ,   $200 million      13%
1.4
999 F. Supp. 719 (S.D.N.Y. 1998)                            ($25.9 mil.)

Walco Investments, Inc. v. Thenen,        $141 million      15%
1.8
975 F. Supp. 1468 (S.D. Fla. 1997)                          ($21 mil.)

In re Combustion Inc.,                    $127 million      36%
2.99
968 F. Supp. 1116 (W.D. La. 1997)

Local 56, United Food & Commercial        $114.5 million    2.8%
2.39
Workers Union v. Campbell Soup Co.,                         ($3 mil.)
954 F. Supp. 1000 (D.N.J. 1997)

Bowling v. Pfizer, Inc., 922 F. Supp.     $102.5 million    10%
Inf. not
1261 (S.D. Ohio 1996), aff 'd                               ($10.2 mil.)
available
102 F.3d 777 (6th Cir. 1996)

In re Domestic Air Transportation         $305 million      5.25%
Inf. not
Antitrust Litig., 148 F.R.D. 297                            ($14.3 mil.)
available
(N.D. Ga. 1993)

In re MGM Grand Hotel Fire Litig.,        $205 million      7%
1-2.95
660 F. Supp. 522 (D. Nev. 1987)

In the charted cases, the attorneys' fee awards ranged
from 2.8% to 36% of the total settlement fund. Looking at
the percentage of recovery in this case (5.7%), it appears
that it is in line with the other cases and even at the low
end of the range. However, a brief review of the facts and
posture of these other cases makes clear that, when
examined through the seven-factor lens of Gunter, the
higher fees awarded in the other cases wer e far more
justified than the high award in this case. Accordingly, the
District Court should have learned from those cases that
extensive time and effort exerted by the attorneys and the
existence of complex legal and factual issues warranted
higher fee awards than the fee award that would have been
appropriate for Kirby.

The district court in In re Auction Houses relied on a pre-
settlement bidding process in awarding attorneys' fees. The

                               26
bidding process in that case differed from the process
employed by the District Court in this case, but it raised
similar problems. However, regar dless of the arguable flaws
in the method by which the district court awarded fees in
In re Auction Houses, that case was far more complex than
the instant case and, as such, is distinguishable. Indeed,
the comments of interim lead counsel, excerpted in the
district court's opinion, are telling:

         Mr. Furth, on behalf of all of the interim lead counsel,
         said that he "never in [his] fondest dreams . . . believed
         that these defendants would pay $512 million" and
         that this settlement "is the most outstanding r esult I
         have ever heard of in the history of the antitrust laws."
         Another of the interim lead counsel noted that he and
         his colleagues had been negotiating with defendants
         prior to the appointment of plaintiffs' lead counsel, that
         they "had really good hard solid numbers from
         [defendants], and we didn't think we could have
         accomplished what Mr. Boies did."

In re Auction Houses Antitrust Litig., 2001 WL 170792, at 6
(S.D.N.Y. Feb. 22, 2001).

In In re Orthopedic Bone Screw, the district court
described the case as "nothing less than an uninterrupted,
hard-fought, `antagonistic' legal battle," in which the
attorneys seeking fees had "conducted substantial,
widespread and extensive discovery" including reviewing
more than 1,500,000 pages of documents, and had
"defended a variety of pleadings and discovery matters and
`litigated a plethora of motions,' " which resulted in the
court issuing nearly 2,000 Pretrial Orders. 2000 WL
1622741, at 6.

In In re Ikon Office Solutions, the district court granted
the 30% fee request because, inter alia, "Counsel expended
more than 45,000 hours on this case and paid out
expenses of more than $3 million with no guarantee of
recovery," the case presented "the legal obstacles of
establishing scienter, damages, causation, and the like,"
and "derivative counsel fees will be taken fr om this
amount." 194 F.R.D. at 194.

                                27
In Shaw v. Toshiba, the district court noted the
protracted schedule of the case, because of which "it has
been necessary to prosecute this action continuously,
around the clock, seven days a week, workdays and
holidays alike." 91 F.Supp.2d at 969. Other factors that
made litigation of Shaw difficult included the two million
pages of documents reviewed by class counsel, the fact that
defendant's corporate headquarters were located in Tokyo,
Japan, as well as the additional burden of having to
translate many documents and much of the testimony from
Japanese to English. Even with these numerous procedural
difficulties, the district court only awarded 7% of the
settlement in attorneys' fees.

The attorneys in Sumitomo spent mor e than 43,000
hours on the case and inspected 11 million pages of
documents, and the case had legal and factual complexities
including "the existence and analysis of the relationships
between and among more than thirty Comex futures
contracts, more than 500 LME contracts, literally hundreds
of physical contracts, and millions of tons involved in the
copper futures, the copper options and the copper
derivative contracts." Sumitomo, 74 F .Supp.2d at 398.

In Kurzweil, the district court noted that, before the
settlement, "[t]here had been no lar ge settlements in
tobacco litigation generally, and no successful action had
yet been brought against a tobacco company based on
allegations of addictiveness of nicotine." 1999 WL 1076105,
at 1. In addition, the attorneys encountered several
obstacles, including that the action was originally
dismissed, and the attorneys reviewed millions of
documents and tens of thousands of deposition and trial
transcripts and conducted numerous depositions. 1999 WL
1076105, at 1.

In In re Lease Oil, the district court explained:

         As well as being novel, this litigation was highly
         complex and thus required a great deal of lawyering
         skill. As just explained, the task of simply compiling
         the evidence was an unusually difficult task, r equiring
         the assistance of experts and the investment of many
         hours.24 Also, being novel, the legal issues raised in the
         litigation required skilled attorneys to handle them.
_________________________________________________________________

24. With respect to gathering evidence, the court asserted:

         Godfrey and others had to create their own databases, compiling

                               28
186 F.R.D. at 445.

The district court in Copley, in granting the 13% fee
award, observed that, "[d]uring expedited discovery, class
counsel reviewed and analyzed more than 125,000 pages of
documents and deposed roughly one hundr ed witnesses." 1
F.Supp.2d at 1408. The case also included 42 days of trial,
and class counsel spent 48,794 hours on the case. Finally,
the legal questions involved in Copley wer e both novel and
complex. As the court explained: "not only was the
certification of this class a complex question, but this was
also the first and only mass tort class action to go to trial,
and the case presented complex medical and scientific
issues of causation." 1 F.Supp.2d at 1413.

PaineWebber too had many featur es that would dictate a
high fee award. Class counsel conducted "extensive,
coordinated discovery," including "coor dinating discovery of
hundreds of boxes of documents through the use of
sophisticated computer databases, and deposing many key
witnesses." 999 F. Supp. at 722. In mor e than two years of
litigation, counsel spent "approximately 70,000 hours in
heretofore uncompensated legal work in pursuit of factual
investigation, drafting of documents, brief writing,
document analysis, depositions, trial preparation,
settlement negotiation and other tasks." 999 F . Supp. at
723. Finally, the legal issues in PaineW ebber were complex,
and class counsel "faced significant substantive and
procedural defenses." 999 F. Supp. at 724.

Walco Investments was described by the district court as
comprising "four years of bitterly-contested litigation." 975
F. Supp. at 1470. The case involved multiple defendants,
and the claims were only loosely related, making class
litigation exceedingly complicated, because "claims raised
_________________________________________________________________

         posted prices, NYMEX prices, transportation costs, grade and
weight
         differentials and so forth simply to determine whether or not a
         cause of action might exist. And, in order tofirst articulate
their
         claims, class counsel had to hire experts to r esearch their
allegation
         that the NYMEX trading center method is a reasonable way of
         determining market price at the lease.

In re Lease Oil, 186 F.R.D. at 445.

                               29
against each category of defendants presented separate
issues of fact and law and involved differing theories of
recovery." 975 F. Supp. at 1471. These circumstances
encouraged the court to award 15% in attor neys' fees to
attorneys from fourteen differ ent firms representing class
plaintiffs.

The action in In re Combustion was eleven years old at
the time of settlement and the attorneys had spent over
50,000 hours on the case. In the litigation, ther e had been
"roughly 160 complaints filed, 1140 answers, 1922
motions, with almost 1000 memoranda in support of or in
opposition to these motions, 285 depositions . . . , 90
hearings, at least one oral argument per month since the
case was removed to federal court, and endless numbers of
settlement conferences," as well as "thr ee fairness hearings,
the first one lasting one week, and the other two lasting
approximately one day each" and "one Daubert hearing
lasting a total of two weeks." In re Combustion, 968 F.
Supp. at 1136.

In Local 56, the court acknowledged "the complexity of
the issues in this case, the significant attendant risks of
proceeding with litigation, and the tenacity and vigor with
which all counsel represented their clients' interests," in
this class action which lasted for four years. 954 F . Supp.
at 1005. Even so, class counsel's fees amounted to only
2.8% of the total settlement, a far smaller per centage than
the fee awarded to Kirby by the District Court.

In Bowling, the district court averr ed that "[t]he Court's
choice of a percentage . . . will be heavily informed by the
value of the services rendered by Counsel." 922 F. Supp. at
1280. The court observed that "Counsel wer e confronted
with myriad complex legal and factual questions in bringing
this action and in negotiating the settlement." 922 F. Supp.
at 1280.

Domestic Air involved a class action against several
airline companies claiming a conspiracy to fix prices. The
court observed:

         Counsel negotiated a significant settlement for the
         class in light of the precarious financial position of
         most of the defendants and over defendants' insistence

                                30
         that they could not provide a larger cash settlement.
         Were it not for the considerable skill and effort of
         plaintiffs' counsel, the action would never have been
         certified as a class action and members of the class
         would receive nothing in return for their claims against
         defendants.

148 F.R.D. 297, 351-52 (N.D. Ga. 1993). In other words,
the action in Domestic Air involved fundamental procedural
obstacles that could easily have resulted in no recovery at
all. Accordingly, class counsel was rewar ded significantly
for negotiating such a large settlement.

Finally, in In re MGM Grand Hotel, the court considered
"the particular and unique circumstances of this case,"
including the fact that the attorneys had r ecovered over
6,000 objects from the fire site and had conducted over
1,400 depositions, in granting the 7% fee awar d. 660 F.
Supp. at 526.

Indeed, in case after case, the same factors r ecur:
complex and/or novel legal issues, extensive discovery,
acrimonious litigation, and tens of thousands of hours
spent on the case by class counsel. Because none of these
factors which increase the complexity of class litigation was
present here, it makes sense that the fee awarded in this
case should be far lower than those awarded in the charted
cases, which fees ranged from 2.8% to 36% of the total
settlement.

Also relevant to the District Court's analysis in this case
is our holding in In re Prudential r emanding the case to the
district court. In that case, we rejected an award of 6.7% of
the settlement fund in a case with a fund of $1 billion to $2
billion because the district court had failed to explain
adequately why it had applied such a high per centage to
the settlement figure and because the court had not
explained why the 5.1 lodestar multiplier was justified. We
also warned in In re Prudential against overemphasizing
counsel's role in recovery, in the context of our criticism of
the district court's assumption that counsel had been a
catalyst for a plan authored by the Multi-State Life
Insurance Task Force, which facilitated the class action
settlement in that it established Prudential's liability. We

                               31
explained that "[a]llowing private counsel to receive fees
based on the benefits created by public agencies would
undermine the equitable principles which underlie the
concept of the common fund, and would create an incentive
for plaintiffs attorneys to `minimize the costs of failure . . .
by free riding on the monitoring efforts of others.' " In re
Prudential, 148 F.3d at 337. Similarly, as we have
consistently observed, Cendant's liability and consequent
collectability had been conceded at the outset of the
PRIDES controversy, and that fact should have been given
major consideration by the District Court when setting
Kirby's attorneys' fees.

Our review of the lack of complexity of this case and of
awards in other large class action settlements, all of which
involved more complex issues, more time invested by the
attorneys, and, with only a few exceptions, smaller total
settlements, leads us to the conclusion that the District
Court abused its discretion in granting a 5.7% attorneys'
fee award in this case.25

4. Checking Against Lodestar

The District Court's abuse of discretion in this case is
magnified when one looks at the lodestar multiplier. As we
stated above, "we have . . . suggested that district courts
cross-check the percentage award at which they arrive
against the `lodestar' award method." Gunter v. Ridgewood
Energy Corp., 223 F.3d 190, 195 n.1 (3d Cir. 2000); see
also In re Prudential, 148 F.3d at 333 (stating that " `it is
sensible for a court to use a second method of fee approval
to cross check' its initial fee calculation"). Even when the
lodestar method is used only as a cross-check,"courts
must take care to explain how the application of a
multiplier is justified by the facts of a particular case."26 In
re Prudential, 148 F.3d at 340-41.
_________________________________________________________________

25. We should note that the award actually amounted to more than 5.7%
of the total recovery. The fund had a value of $341.5 million, but any
unclaimed portion of the fund returned to Cendant. As of August 1999,
only 22,502,782 Rights, with a monetary value of $263.5 million, were
claimed. Taking this amount as the total r ecovery, Kirby's attorneys'
fees
constituted 7.3% of the total fund.
26. We observed in In re GM Trucks that "[t]he Supreme Court . . . has
rejected the use of multipliers to enhance the lodestar's hourly rate

                               32
In this case, the lodestar multiplier is 7 at a minimum
(using Kirby's senior partner rate as the rate for all hours),
and the Trust calculates the lodestar multiplier as 10.27
Either of these multipliers (Kirby's multiplier of 7 or the
Trust's multiplier of 10) is substantially higher than any of
the multipliers in the cases charted above, which range
from 1.35 to 2.99, and is also significantly higher than the
"large" 5.1 multiplier in In r e Prudential, which we
questioned because "the court offer[ed] little explanation as
to why a multiplier was necessary or appropriate." 148 F.3d
at 340-41. In allowing such a high multiplier in this case
without even calculating it, much less explaining how it is
justified, the District Court strayed from all responsible
discretionary parameters in the awarding of Kirby's
attorneys' fees.

In all the cases in which high percentages wer e applied
to arrive at attorneys' fees, the courts explained the
extensive amount of work that the attorneys had put into
the case, and appropriately the lodestar multiplier in those
cases never exceeded 2.99. This range is consistent with
the principle that " `[m]ultiples ranging from one to four are
frequently awarded in common fund cases when the
lodestar method is applied.' " In r e Prudential, 148 F.3d 283,
341 (3d Cir. 1998) (quoting 3 Herbert Newber g & Alba
Conte, Newberg on Class Actions, S 14.03 at 14-5 (3d ed.
1992)). In this case, the District Court judge made clear
that he wanted to reward Kirby for Kirby's quick and
beneficial settlement of the case, and that may be a good
reason for the fee award to exceed the lodestar, but not to
the exclusion of all other factors. On remand of this case to
the District Court, we strongly suggest that a lodestar
multiplier of 3 (the highest multiplier of the cases reviewed
above) is the appropriate ceiling for a fee award, although
_________________________________________________________________

amount." 55 F.3d 768, 822 (3d Cir. 1995) (citing City of Burlington v.
Dague, 505 U.S. 557 (1992)). However, as stated above, calculation of
the lodestar multiplier is still appropriate when used to cross-check the
reasonableness of a percentage-of-r ecovery fee award.

27. The Trust calculates the lodestar multiplier as 10 because it assesses
the appropriate lodestar fee as $1.9 million, 1/10 of the $19.3 million
awarded. (See Trust's Brief at 25-26.)

                               33
a lower multiplier may be applied in the District Court's
discretion. The 3 multiplier would result in an award of no
more than $8.3 million for Kirby (calculating the lodestar at
$495/hour).

5.

We are seriously troubled by the District Court's award of
attorneys' fees constituting 5.7% to 7.3% of the total
settlement. As discussed above, this case was neither
legally nor factually complex and did not require significant
motion practice or discovery by Kirby, and the entir e
duration of the case from the filing of the Amended
Complaint to the submission of a Settlement Agr eement to
the District Court was only four months. Other cases in
which higher percentages were awar ded are so dissimilar
factually and legally from this case that they cannot be
relied upon to support the 5.7% award made in this case.
In addition, our discussion and holding in In r e Prudential
requires a holding here that the District Court's award was
an abuse of its discretion, particularly wher e the District
Court appeared to be attributing more r esponsibility to
Kirby for the quality of the settlement than may legitimately
be warranted. Accordingly, we will vacate the District
Court's fee award to Kirby and remand the issue of Kirby's
attorneys' fees to the District Court for a more thorough
and thoughtful evaluation, including an analysis of, and
compliance with, the factors enunciated by us in Gunter
and in this opinion.

III.

Finally, the Trust argues that the District Court erred in
not granting attorneys' fees to the Trust's attorneys for
suggesting a bidding process to choose Lead Counsel and
for objecting to Lead Counsel's fee application.

The Second Circuit stated in White v. Auerbach:

         it is well settled that objectors have a valuable and
         important role to perform in pr eventing collusive or
         otherwise unfavorable settlements, and that, as the
         district court recognized, they are entitled to an

                                34
         allowance as compensation for attorneys' fees and
         expenses where a proper showing has been made that
         the settlement was improved as a result of their efforts.

         Ordinarily the trial judge has broad discr etion in
         deciding whether, and in what amount, attor neys' fees
         should be awarded, since he is in the best position to
         determine whether the participation of objectors
         assisted the court and enhanced the recovery.

500 F.2d 822, 828 (2d Cir. 1974).

In this case, the District Court judge exercised his "broad
discretion" in finding that the Trust's attorneys had not
made the "proper showing . . . that the settlement was
improved as a result of their efforts." The District Court
judge made clear that he had considered the idea of a
bidding process before the Trust's attorneys suggested that
procedure, stating: "Walker's opinions have been out there
since 1993 at least28 . . . Why do you think that the door
was only opened by your key?" (JA 766.) He also asserted
that "my last year's clerk and I actually had br ooded this
idea of an auction long before you came down the pike."
(JA767.)

With respect to the Trust's claim that its attorneys'
objections to the fee application resulted in a reduction of
the fee award from $34.15 million to appr oximately $19
million, the District Court gave no indication that the
objections were the reason for the r eduction and even
stated, "if I find that what Mr. Kirby wants is excessive, I'm
not dependent upon you . . ." (JA765.) Hence, because the
Trust had not demonstrated that it had been r esponsible
for the procedure utilized by the District Court or that its
actions had resulted in a reduction of Kirby's fees from $34
million to $19 million--findings which are not clearly
erroneous--we will sustain the District Court in its rulings
on these points.
_________________________________________________________________

28. Judge Vaughn Walker actually implemented the bidding process in In
re Oracle Sec. Litig. in 1990. 131 F.R.D. 688 (N.D. Cal. 1990). Judge
Walker's process differed significantly from the bidding process here in
that it was not a sealed-bid process.

                               35
However, our review of the District Court's attorneys' fee
award to Kirby would not have come about had it not been
for the Trust's appeal. As the Ninth Cir cuit observed in
Zucker v. Occidental Petroleum Corp., to which we have
earlier adverted, "[t]he contribution [a particular class
member's] attorney made, by providing an adversarial
context in which the district court could evaluate the
fairness of attorneys' fees, was substantial." 192 F.3d 1323,
1329 (9th Cir. 1999).

Recognizing this fact, that it was the Trust which called
our attention to the many aspects of Kirby's fee award
which we have discussed and which we have found
requires reconsideration by the District Court, we would be
remiss if we did not acknowledge this benefit 29 and remand
the Trust's claims for its own attorneys' fees to the District
Court for reconsideration together with Kirby's fee
application. Of course, this will requir e the necessary
submissions by the Trust's attorneys to comply with
normal fee procedures. Under these circumstances, we
think it appropriate for the District Court to evaluate the
value of the benefit of the Trust's contribution to the
ultimate fee (to be decided by the District Court on remand)
and to compensate the Trust to that extent. 30

In so holding, we are fully aware that Cendant had
agreed not to contest the award of fees as part of its
_________________________________________________________________

29. It bears mention that the Trust's appellate brief urged that Kirby's
fees be reduced from $19 million to $7.6 million, (see Appellant's Brief,
at 30), a similar figure to the one at which we arrived independently.

30. In its appellate brief, Kirby suggests that the Trust may not have
standing to appeal the District Court's denial of the fee request because
it was the Trust's counsel, not the Trust itself, that made that request
in the District Court. This jurisdictional ar gument, though not without
merit, need not concern us for two reasons. First, the District Court's
decision denying fees to the Trust's counsel stands insofar as it related
to the argument raised by counsel befor e the District Court. We remand
the issue of the Trust's counsel's fee r equest to the District Court only
with respect to the Trust's effect on the settlement through this appeal.
Second, we have repeatedly emphasized in this opinion the importance
of the court's role in reviewing counsel's fees in class actions, and we
believe this role extends to the District Court hearing a fee application
by
the Trust's counsel at this point.

                               36
settlement agreement. We also acknowledge that the return
to Cendant of any unclaimed rights may well enhance the
value of Cendant's rights to its shareholders and rights
beneficiaries.

IV.

Although we will not disturb the settlement itself which
has not been challenged on appeal, we will vacate the
award of attorneys' fees to Kirby and r emand this case to
the District Court for a reevaluation of the amount of
attorneys' fees, both because the District Court did not
adequately explain its reason for the fee awar d and because
the fee award does not comply with the r equirements of our
jurisprudence. We will also vacate the District Court's order
denying attorneys' fees to the Trust and remand for
reconsideration in light of the foregoing discussion and
opinion.

A True Copy:
Teste:

         Clerk of the United States Court of Appeals
         for the Third Circuit

                               37
