Ark. Teacher Ret. Sys. v. State St. Bank & Trust Co., C.A. No. 11-10230-MLW

513 F.Supp.3d 202

ARKANSAS TEACHER RETIREMENT SYSTEM, on behalf of itself and all others similarly situated, Plaintiff,

v.STATE STREET BANK AND TRUST COMPANY, Defendant.

Arnold Henriquez, Michael T. Cohn, William R. Taylor, Richard A. Sutherland, and those similarly situated, Plaintiffs,

v.State Street Bank and Trust Company, State Street Global Markets, LLC and Does 1-20, Defendants.

The Andover Companies Employee Savings and Profit Sharing Plan, on behalf of itself and all others similarly situated, and James Pehoushek-Stangeland, on behalf of himself and all others similarly situated, Plaintiffs,

v.State Street Bank and Trust Company, Defendant.

C.A. No. 11-10230-MLW

C.A. No. 11-12049-MLW

C.A. No. 12-11698-MLW

United States District Court, D. Massachusetts.

Filed January 19, 2021

Evan R. Hoffman, Thornton & Naumes LLP, Michael A. Lesser, Michael P. Thornton, Garrett C. Bradley, Thornton Law Firm LLP, Boston, MA, Jonathan D. Selbin, Pro Hac Vice, Daniel P. Chiplock, Lieff Cabraser Heimann & Bernstein, LLP, Lawrence A. Sucharow, Pro Hac Vice, Nicole M. Zeiss, Pro Hac Vice, David J. Goldsmith, Joel H. Bernstein, Michael H. Rogers, Paul J. Scarlato, Labaton Sucharow LLP, New York, NY, Richard M. Heimann, Pro Hac Vice, Robert L. Lieff, Pro Hac Vice, Lieff, Caraser, Heimann & Bernstein LLP, San Francisco, CA, for Plaintiff Arkansas Teacher Retirement System.

Laura R. Gerber, Lynn Lincoln Sarko, Keller Rohrback LLP, Seattle, WA, for Plaintiffs James Pehoushek-Stangeland, Andover Companies Employee Savings and Profit Sharing Plan.

Beth E. Bookwalter, Daniel W. Halston, Jeffrey B. Rudman, William H. Paine, Wilmer Hale LLP, Boston, MA, for Defendant.

MEMORANDUM AND ORDER

WOLF, D.J.

I. SUMMARY

As stated in the February 27, 2020 Memorandum and Order awarding and allocating attorneys’ fees in this class action:

The Court did not appoint [the Competitive Enterprise Institute's Center for Class Action Fairness ("CCAF")] as guardian ad litem for the class or authorize it to participate in proceedings before the Master [that the court appointed to investigate the reliability of representations made to the court in the original request for attorneys’ fees]. The court did, however, allow CCAF to make submissions to the court and participate in hearings it conducted. CCAF brought expertise to the proceedings, which was often very helpful to the court.

Dkt. No. 590 at 12; Arkansas Teacher Retirement System v. State Street Bank and Trust Company, 2020 WL 949885, at *4 (D. Mass. Feb. 27, 2020). The court noted that it "would consider ordering that CCAF be compensated for its work if it had the authority to do so." Id., n.3.

CCAF, which is now part of the Hamilton-Lincoln Law Institute ("HLLI"), has moved, under Federal Rule of Civil Procedure 54(d), for an award of attorneys’ fees in the amount of $60,690 as compensation for work that it performed as amicus at the invitation of the court. See Dkt. No. 647. CCAF does not seek compensation for the additional work it did as amicus at its own initiative.¹

CCAF requests that its fee be paid from the fees awarded to Labaton Sucharow LLP ("Labaton"), The Thornton Law Firm ("Thornton"), and Lieff Cabraser Heiman & Bernstein ("Lieff") (collectively "Class Counsel"). Id. at 19. However, CCAF asks that, if necessary, its fee be paid from the common fund. Id.

Class Counsel argue that the court did not appoint CCAF to serve as amicus and CCAF is not entitled to compensation for the work that it did on a voluntary basis. See Dkt. No. 650. However, Class Counsel state that if the court awards CCAF attorneys’ fees, they should be paid from the common fund.

The Master takes no position on whether CCAF should be awarded attorneys’ fees. See Dkt. No. 652 at 3. The Master argues, however, that if an award to CCAF is made, it should be paid by Class Counsel. Id. at 3-6.

As explained below, the court concludes that it has the equitable authority to award attorneys’ fees to CCAF and that it is appropriate to award $60,690 as compensation solely for work performed in response to court orders inviting CCAF's advice. As the court did not appoint CCAF as amicus, there is a question whether the court has the authority to reduce the award made to Class Counsel to compensate CCAF even though their conduct prompted the court to seek CCAF's assistance. It is, however, permissible and appropriate to make the award from the common fund because CCAF's work contributed to increasing it. Therefore, the court is doing so.

In the February 27, 2020 Memorandum and Order, the court awarded a total of $60,000,000 in attorneys’ fees, $15,000,000 less than the original, vacated $75,000,000 award. It allocated $15,399,163 to Lieff, which is $1,139,457 less than Lieff initially received pursuant to an agreement between Class Counsel. Lieff appealed the reduction of its fee. On September 3, 2020, the First Circuit dismissed the appeal without prejudice because it found that there was not yet a definitive, appealable final judgment concerning attorneys’ fees. See Case No. 20-1365, Judgment (Dkt. No. 8).

Following argument at a September 22, 2020 hearing, on September 29, 2020, the court ordered Class Counsel to make payments into escrow on January 4 and March 30, 2021, and ordered those funds be distributed on January 15 and April 30, 2021. See Dkt. Nos. 646, 646-1. On January 4, 2021, the court decided that the first payment into escrow did not have to be made until a final judgment concerning attorneys’ fees is entered. See Dkt. No. 657.

Lieff then reiterated its intent to renew its appeal and objected to its escrowed funds being distributed until the appeal is decided. See Dkt. No. 658. The Master argues that those funds should be distributed as previously ordered. See Dkt. No. 661.

The court finds that it is most appropriate to order that the funds escrowed by Lieff be distributed with the escrowed funds of other Class Counsel unless Lieff obtains a stay pending appeal. Lieff is being ordered to file its appeal and motion to stay in this court by January 27, 2021.

In addition, CCAF has moved to be appointed guardian ad litem to represent the interests of the class in Lieff's appeal. The issues addressed in the February 27, 2020 Memorandum and Order arose in meaningful measure because the usual adversary process did not operate to test representations made by Class Counsel in their request for an award of $75,000,000 as attorneys’ fees. There is no party to represent the interests of the class in responding to Lieff's appeal. The court will ask the First Circuit to invite it, as fiduciary for the class, to retain counsel to appear at public expense. Therefore, CCAF's motion to be appointed guardian ad litem is being denied without prejudice to being renewed if the First Circuit denies the court's request.

II. DISCUSSION

A. CCAF'S Request for Attorneys’ Fees

As indicated earlier, CCAF requests an award of attorneys’ fees in the amount of $60,690 for work performed in 2018, at the request of the court. It does not request compensation for work performed previously or subsequently solely at its own initiative. The court finds that, in the unique circumstances of this case, it is permissible and appropriate to compensate CCAF reasonably for the work it performed in response to the court's invitation; that $60,690 will provide reasonable compensation for that work; and that the payment should be made from the common fund, rather than by Class Counsel.

CCAF is a non-profit organization that describes its mission as representing the interests of shareholders in connection with the settlement of class action lawsuits, often by challenging requests for attorneys’ fees. Center for Class Action Fairness, HAMILTON LINCOLN LAW INSTITUTE , https://hlli.org/class-action-fairness/. CCAF states on its website that "[w]hen CCAF prevails, lawyers get less, class members get more, and the rule of law is strengthened." Id.

On February 6, 2017, the court gave notice that it was considering appointing a Master to investigate the accuracy and reliability of information provided by Class Counsel in support of their successful request for an award of attorneys’ fees in the amount of $75,000,000. See Dkt. No. 117.

After the February 6, 2017 Order, CCAF filed a motion to be appointed guardian ad litem for the class or to serve as amicus, and a supporting memorandum. See Dkt. Nos. 126, 126-1. CCAF asked the court to expand the scope of the Master's investigation to include, among other things, whether Class Counsel had misrepresented a study by Brian Fitzpatrick (the "Fitzpatrick Study") in their request that the court award 25% of the $300,000,000 common fund as attorneys’ fees. See Dkt. No. 126-1 at 13. It also argued that the court should order that Class Counsel pay the cost of the Master's work. The court did both. See Dkt. No. 173.

In addition, CCAF noted that unless the original award of attorneys’ fees was vacated, Class Counsel might later argue that the court lacked jurisdiction to reduce it. CCAF asked to be appointed guardian ad litem for the class, to serve pro bono if necessary, in part to permit it to move under Federal Rule of Civil Procedure 60 to vacate the $75,000,000 award. Class counsel opposed CCAF's request to be appointed guardian ad litem, but agreed to move to vacate the original award itself. See Dkt. No. 178. The court granted the motion to vacate. See Dkt. No. 331.

On March 7, 2017, the court heard argument on CCAF's request to be appointed guardian ad litem, or to serve as amicus before the Master. See Dkt. No. 172. It took these requests under advisement.

CCAF is not seeking attorneys’ fees for any of the foregoing work.

The Master conducted a thorough investigation, which became protracted after he discovered that Labaton had paid $4,100,000 to Damien Chargois, a lawyer who helped obtain the Arkansas Teacher Retirement System ("ATRS") as a client for Labaton, but did not work on this case. See Dkt. No. 590 at 62-68. In his voluminous Report,...