In re Bioscrip, Inc. Sec. Litig.

273 F.Supp.3d 474

IN RE BIOSCRIP, INC. SECURITIES LITIGATION

13–cv–6922 (AJN)

United States District Court, S.D. New York.

Signed July 26, 2017

MEMORANDUM & ORDER

ALISON J. NATHAN, United States District Judge

On June 16, 2016, the Court issued orders approving the plan of allocation of the net settlement fund and the class action settlement. Dkt. Nos. 123–24. The Court now addresses Lead Counsel's application for attorney's fees. For the reasons that follow, Counsel's application is granted in its entirety.

I. Background

The above case is a securities class action brought on behalf of all persons and entities who purchased or acquired the publicly traded common stock of BioScrip, Inc. ("BioScrip") between November 9, 2012 and November 6, 2013. See Dkt. No. 68, at 1 (hereafter "Mar. 31, 2015 Order"). The consolidated actions stem from allegations that BioScrip violated the securities laws through two sets of allegedly misleading statements: first, statements affirming BioScrip's compliance with relevant laws notwithstanding the Government's investigation into an alleged kickback scheme between BioScrip and Novartis Pharmaceuticals Corp.; and second, statements affirming the profitability of BioScrip's pharmacy benefit management operating segment, notwithstanding the undisclosed loss of a significant segment of that business. See generally Consolidated Class Action Complaint (Dkt. No. 22) (hereafter the "Complaint"). The Court assumes familiarity with the Court's Memorandum and Order of March 31, 2015, granting in part and denying in part Defendants' motions to dismiss, which describes in detail the factual and legal contours of the case. See Mar. 31, 2015 Order.

On September 30, 2013, Plaintiff Timothy Faig filed the first class action complaint in this case, Dkt. No. 1, which was followed by the filing of a related complaint on November 15, 2013, by the West Palm Beach Police Pension Fund, 13–cv–8175, Dkt. No. 1. On December 2, 2013, the Fresno County Employees' Retirement Association ("Fresno" or "Lead Plaintiff") moved for appointment as lead plaintiff, as well as for approval of its selection of lead counsel, the law firm of Bernstein Litowitz Berger & Grossmann LLP ("BLB & G" or "Lead Counsel"¹ ). Dkt. No. 11. On December 19, 2013, the Court consolidated the two class action complaints, and appointed Fresno as Lead Plaintiff and BLB & G as Lead Counsel. Dkt. No. 17.

Lead Counsel represents that, over the next few months, it conducted an extensive factual and legal investigation, pursuant to which counsel reviewed numerous documents, conducted 72 interviews with former employees of BioScrip and other relevant individuals, researched relevant case-law, and consulted with various experts. Ross Decl. ¶ 19. On the basis of this investigation, on February 19, 2014, Lead Counsel filed Plaintiffs' Consolidated Class Action Complaint, a 110–page document asserting claims under both the Exchange Act of 1934, 15 U.S.C. § 78a et seq., and the Securities Act of 1933, 15 U.S.C. § 77a et seq. See Complaint. In particular, Plaintiffs brought five claims against the Defendants: a claim under Section 10(b) of the Exchange Act and Rule 10b–5 promulgated pursuant to that section, a Section 20(a) control person claim, a claim under Section 11 of the Securities Act, a Section 12(a)(2) claim under that act, and a Section 15 control person liability claim. See Mar. 31, 2015 Order at 13. Two sets of Defendants then moved to dismiss the Complaint. See Dkt. Nos. 41, 45. On March 31, 2015, the Court granted in part and denied in part both motions. Mar. 31, 2015 Order. On June 5, 2015, the Court denied the Defendants' motion for partial reconsideration. Dkt. No. 86. Thereafter, the parties began the discovery process, which included Defendants' production of approximately 800,000 pages of documents. Ross Decl. ¶ 41.

In August of 2015, the parties agreed to seek a settlement via mediation, and selected former U.S. District Judge Layn Phillips as a mediator. Id. ¶ 42. As part of the mediation process, both parties submitted briefing, and appeared for a full-day mediation session on September 25, 2015. Id. ¶ 46. At the session, the parties debated numerous factual and legal areas of dispute, and ultimately failed to reach an agreement to settle the action. Id. After additional negotiations, however, and after Judge Phillips provided a recommended settlement amount, the parties ultimately reached a resolution, which they submitted to this Court for preliminary approval on December 18, 2015. Dkt. No. 101. On February 11, 2016, the Court issued an order preliminarily approving the settlement and providing for notice. Dkt. No. 106.

In the settlement, BioScrip agreed to pay $10,900,000 to settle the lawsuit in its entirety (on behalf of all defendants). Ross Decl. ¶ 3; see also Settlement ¶ 1(rr) (Dkt. No. 101–1); Dkt. No. 124 (Judgment Approving Class Action Settlement). The settlement agreement also stipulated that Lead Counsel would apply for attorney's fees, as well as costs and expenses, directly from the fund. See Settlement ¶ 19. The settlement also specified that Defendants would have no responsibility nor liability for attorney's fees beyond the settlement amount. Id. ¶ 23.

On May 9, 2016, Lead Plaintiff moved to approve the class action settlement and plan of allocation, Dkt. No. 107, and Lead Counsel moved for an award of attorney's fees, costs, and expenses, Dkt. No. 109. In particular, Lead Counsel requested attorney's fees in the amount of 25% of the settlement fund, i.e. $2,725,000, plus interest earned at the same rate as the Settlement Fund, reimbursement for $133,565.28 in litigation expenses incurred, and reimbursement to Lead Plaintiff for $1,378.61 in costs. See Pl. Mem. at 1; Ross Decl. ¶ 2. Lead Counsel argued that, relying on the percentage method to calculate a reasonable attorney's fee, the request should be approved. See id. at 3–4 (citing Goldberger v. Integrated Res., Inc., 209 F.3d 43, 47 (2d Cir. 2000) (contrasting the percentage method, under which "[t]he court sets some percentage of the recovery as a fee," with the lodestar method, "under which the district court scrutinizes the fee petition to ascertain the number of hours reasonably billed to the class and then multiplies that figure by an appropriate hourly rate")). In this case, Lead Counsel acknowledged that 25% of the fund would amount to a 1.39 multiplier of Lead Counsel's lodestar. See Pl. Mem. at 9.

On May 23, 2016, the Court received an objection to the fee award, from the Isaacson/Weaver Family Trust (the "Trust" or "Objector"). See Dkt. No 113 (hereafter "Obj. Mem."). The Trust objected to any award above the lodestar, primarily on the basis that such an award would be inconsistent with the Supreme Court's admonition in Perdue v. Kenny A. ex rel. Winn that, when calculating "an attorney's fee[ ] under federal fee-shifting statutes ... there is a strong presumption that the lodestar is sufficient." 559 U.S. 542, 546, 130 S.Ct. 1662, 176 L.Ed.2d 494 (2010). No additional objections to the settlement or fee application were received from any class members. See June 13, 2016 Tr. at 4 (Dkt. No. 125).

On June 13, 2016, the Court held a settlement fairness hearing to discuss both the proposed settlement and Lead Counsel's request for fees. See generally June 13, 2016 Tr. At that hearing, the Court heard argument from Lead Counsel and the Objector as to the reasonableness of the fee request. See id. at 12–35.

On June 16, the Court issued orders approving the plan of allocation of the net settlement fund and the class action settlement, but reserved on the question of attorney's fees. Dkt. Nos. 123, 124. The Court now addresses Lead Counsel's application for attorney's fees amounting to 25% of the common fund and the Objector's arguments that the fee award should be limited to the lodestar. For the reasons that follow, Lead Counsel's application for fees is granted in its entirety.²

II. The Objection

In opposition to Lead Counsel's requested fee, the Objector raises two principal arguments. First, and primarily, the Objector argues that Supreme Court precedent requires this Court to apply a " ‘strong presumption’ that the lodestar figure is reasonable," a legal standard that would preclude the award of a lodestar multiplier in all but the most extraordinary of cases. See Perdue, 559 U.S. at 554, 130 S.Ct. 1662 ; City of Burlington v. Dague, 505 U.S. 557, 562, 567, 112 S.Ct. 2638, 120 L.Ed.2d 449 (1992) (holding that such a presumption applies when a court awards fees pursuant to a fee-shifting statute). Were the Objector correct, it would follow that the Court would lack the discretion—absent a finding that this case were " ‘rare’ " and " ‘exceptional" ’—to award Lead Counsel a fee higher than its lodestar. Perdue, 559 U.S. at 552, 130 S.Ct. 1662 (quoting Penn. v. Delaware Valley Citizens' Council for Clean Air, 478 U.S. 546, 565, 106 S.Ct. 3088, 92 L.Ed.2d 439 (1986) ).

Second, were the Court to reject the Objector's legal argument and conclude that it has discretion to award a lodestar multiplier without such a finding, the Objector argues that the Court should, in its discretion, decline to award a fee that would result in any lodestar enhancement. Obj. Mem. at 11–21.

The Court addresses each argument in turn. In summary, the Court concludes, first, that the presumption against a lodestar enhancement articulated in Dague and Perdue when a court awards a reasonable attorney's fee from a defendant pursuant to a fee-shifting provision does not apply to the award of fees in this case from a common fund created after a settlement. Second, evaluating the fee request using the common fund principles articulated in Goldberger, the Court finds the request reasonable and approves it in full.

III. The Legal Standard Governing the Award of Fees in this Case

The Court first addresses the Objector's primary argument: that, in awarding fees in this case, the Court must apply a " ...