                                                                                                                           Opinions of the United
2007 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


7-27-2007

In Re: Bristol Myers
Precedential or Non-Precedential: Non-Precedential

Docket No. 06-2964




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                                                              NOT PRECEDENTIAL

                     UNITED STATES COURT OF APPEALS
                          FOR THE THIRD CIRCUIT


                                     No. 06-2964


          IN RE: BRISTOL-MYERS SQUIBB SECURITIES LITIGATION

                   RITA CARFAGNA, as the Managing Member
                             of Cascia II, LLC,

                                                    Appellant.


                  On Appeal from the United States District Court
                            for the District of New Jersey
                               (D.C. No. 00-CV-01990)
               District Court Judge: The Honorable Stanley R. Chesler


                             Argued June 27, 2007
             Before: BARRY, FUENTES, and JORDAN, Circuit Judges.

                               (Filed: July 27, 2007)
                                      _______

Edward F. Siegel (ARGUED)
27600 Chagrin Boulevard, Suite 340
Cleveland, OH 44122
Attorney for Appellant

Thomas A. Dubbs
James W. Johnson (ARGUED)
Labaton Sucharow & Rudoff LLP
100 Park Avenue, 12th Floor
New York, NY 10017
Allyn Z. Lite
Lite De Palma Greenberg & Rivas, LLC
Two Gateway Center, 12th Floor
Newark, NJ 07102
Attorneys for Amalgamated Bank NY



                               OPINION OF THE COURT


FUENTES, Circuit Judge.

       After a $185 million settlement in this securities class action, lead counsel

requested $36.6 million in attorneys’ fees. The District Court approved the request

despite the objections of class member Rita Carfagna, who now appeals. For the reasons

that follow, we will affirm.

                                             I.

       In July 2000, a number of class action suits against Bristol-Myers Squibb were

consolidated. Amalgamated Bank, as trustee of LongView Collective Investment Fund,

was named the lead plaintiff, and Labaton Sucharow & Rudoff LLP was named lead

counsel. In an August 2000 consolidated complaint, plaintiffs alleged that Bristol-Myers

and its senior officers made knowingly false statements about the safety and sales

prospects of a new drug, ultimately leading to a significant drop in the price of Bristol-

Myers’s shares. An amended complaint in May 2002 made similar claims about Bristol-

Myers’s statements and omissions regarding two subsequent clinical trials of the drug.1

       In June 2003, lead counsel signed an attorneys’ fee arrangement with lead plaintiff.



       1
       Plaintiffs also filed a second amended complaint in August 2005, which simply
conformed the allegations to the District Court’s partial grant of summary judgment.

                                              2
It provided that lead counsel would receive a certain percentage of any class award

depending on the stage at which settlement or judgment occurred and the amount of the

award. In February 2006, the parties reached a settlement, pursuant to which Bristol-

Myers would pay the class $185 million and enact significant corporate governance

reform. Following its approval of the settlement, lead plaintiff granted lead counsel’s

request to set aside the original fee arrangement and instead seek up to 20% of the

settlement fund from the District Court. A settlement notice was then mailed to the class;

it indicated that lead counsel would seek fees of up to 20% of the fund, but it did not

disclose the original fee agreement.

       Lead counsel then asked the District Court to approve fees of $36.6 million

(19.77% of the fund), which represented the lodestar.2 This was $14.7 million more than

counsel would have received under the original fee arrangement. At a hearing before the

District Court, class member Rita Carfagna objected to the fees on several grounds. The

Court, however, approved the fee request after concluding that counsel had “earned every

penny that they’ve sought.” App. 1188.

       We have jurisdiction in this case under 28 U.S.C. § 1291. We review the District

Court’s approval of fees for abuse of discretion. Gunter v. Ridgewood Energy Corp., 223



       2
         “Lodestar” is defined as “[a] reasonable amount of attorney’s fees in a given
case, usu. calculated by multiplying a reasonable number of hours worked by the
prevailing hourly rate in the community for similar work, and often considering such
additional factors as the degree of skill and difficulty involved in the case, the degree of
its urgency, its novelty, and the like.” Black’s Law Dictionary 960 (8th ed. 2004).

                                              3
F.3d 190, 195-96 (3d Cir. 2000).

                                            II.

                                             A.

       This is a common fund case, in which the attorneys’ fees and class award come

from the same source. In other words, “every additional dollar given to class counsel

means one less dollar for the class, regardless how a total settlement package is formally

structured.” In re Cendant Corp. Litig., 264 F.3d 201, 256 (3d Cir. 2001). Among the

factors that district courts should consider when deciding whether to approve attorneys’

fees in a common fund case are:

       (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 awards in similar cases.

Gunter, 223 F.3d at 195 n.1.

       Carfagna argues that lead counsel should have been bound by its original

agreement with lead plaintiff. She notes that lead counsel is very experienced and that it

entered into the original fee arrangement almost three years after the litigation began.

Carfagna, however, has failed to explain why the District Court’s approval of $36.6

million in attorneys’ fees was an abuse of discretion. In fact, the Court carefully

reviewed all the relevant factors and specifically considered the existence of the previous

fee arrangement. The Court observed that counsel took on “extraordinarily substantial


                                             4
risks”; the settlement fund was “very large” for the type of securities fraud claimed;

counsel was skilled and efficient; the litigation was long and complex, requiring an

“extraordinary” devotion of time; the attorneys’ fee award, as a percentage of the

settlement fund, was on the “low end” as compared to similar cases; and it would be bad

policy to award less than the lodestar when counsel performed so well. App. 1188-94. In

light of these considerations, as well as lead plaintiff’s approval of the fee request, we

cannot say the District Court abused its discretion.3

                                              B.

       Under Federal Rule of Civil Procedure 23(e)(1)(B), district courts “must direct

notice in a reasonable manner to all class members who would be bound by a proposed

settlement.” We have explained that “Rule 23(e) notice is designed to summarize the

litigation and the settlement and to apprise class members of the right and opportunity to

inspect the complete settlement documents, papers, and pleadings filed in the litigation.”

In re Prudential Ins. Co., 148 F.3d 283, 327 (3d Cir. 1998). Without citing to any case

law, Carfagna argues that the failure to disclose the original fee arrangement in the

settlement notice was a material omission rendering the notice inadequate. She also

contends that more class members would have objected had they known of the original


       3
         Carfagna also argues that lead plaintiff’s attorneys failed to provide sufficiently
detailed summaries of their work on the case. She does not, however, make any specific
allegations that the attorneys inflated their hours. And although she cites the billing
summary of Martis Alex, which does contain only minimal information, she fails to note
that he also submitted a separate affidavit detailing his firm’s work on the case. See App.
798-801.

                                              5
fee arrangement.

       We believe that it would have been preferable for lead counsel to disclose the

original fee arrangement in the notice. Nevertheless, the notice properly summarized the

litigation and settlement, and it indicated that counsel would be seeking fees of up to 20%

of the settlement fund. The notice, therefore, was directed “in a reasonable manner” and

provided class members with sufficient information.

       Carfagna also claims the settlement notice was misleading with respect to the

percentage of fees and expenses that would be requested. One sentence of the notice

states that lead counsel “intends to apply for an award for fees and expenses not to exceed

20% of the Settlement Fund.” App. 514 ¶ 54. In fact, as Carfagna notes, lead counsel

sought $36.6 million in fees and $3.6 million in expenses, which together constitute

21.7% of the settlement fund. Lead counsel concedes that the inclusion of the word

“expenses” was an unfortunate error, but it notes that two other paragraphs of the notice

state clearly that expenses will be in addition to the 20% in fees. See App. 505 ¶ 4; App.

508 ¶ 19. We believe that class members who read the full notice understood that lead

counsel would seek reimbursement for expenses in addition to the 20% in fees. Certainly,

it was not an abuse of discretion for the District Court to approve the fee request despite

this one mistake in the notice.

                                            III.

       For the reasons stated above, we will affirm the District Court’s decision to

approve lead counsel’s request for $36.6 million in attorneys’ fees.

                                              6
