Attorney General Eric Schneiderman has blasted as unreasonable and "wildly excessive" a $42 million request for legal fees and expenses from plaintiffs lawyers representing investors in a settlement related to Bernard Madoff's Ponzi scheme run as Bernard L. Madoff Investment Securities LLC.
Schneiderman's office, the U.S. Labor Department and 13 plaintiffs firms brought separate actions on behalf of investors against Ivy Asset Management, a subsidiary of Bank of New York Mellon, accusing it of advising clients to invest with Madoff in spite of red flags about Madoff's operations.
While several state and federal actions as well as arbitrations were being prosecuted, the parties also convened to attempt to hammer out a settlement. In November 2012 they reached a proposed $219 million settlement, which awaits approval by Southern District Judge Colleen McMahon (See Profile). The bulk of the settlement funds would come from Ivy Asset.
Plaintiffs lawyers then requested $40.8 million in legal fees, about 20 percent, and $1.2 million in expenses as part of the settlement. The attorney general shot back with court filings that sharply criticized the total proposed award and number of hours, 118,000, the attorneys say they devoted to the case.
"118,000 is an astounding number to develop the same body of evidence that the Attorney General developed in 6,000 hours," the state's motion said, claiming the number of hours reflects "substantial non-efficiencies, waste and duplication."
The fee request will likely be discussed at a March 15 hearing before McMahon in In re: J.P. Jeanneret Associates, 1:09-cv-03907.
One of the firms is Lowey Dannenberg Cohen & Hart in White Plains, lead counsel and co-liaison counsel with the U.S. Labor Department. The firm would receive $14.3 million if a 20 percent fee is awarded, Lowey partner Barbara Hart said in court papers.
In their motion for a fee award, plaintiffs counsel defended the fee request by explaining that in a beauty contest, Lowey was retained as lead counsel after agreeing to a cap on fees lower than all the other qualified bidders.
In further justifying the fee, the lawyers pointed out they are not seeking fees on certain portions of the settlement fund, including $7 million going to the Labor Department, $5 million to the New York attorney general and another $4 million to class members. The attorneys said they then agreed to cap any request for fees at 20 percent of that reduced amount.
The attorneys also claim that lead plaintiffs and other class representatives have agreed the request is fair, and supported under the factors set forth under the Second Circuit's 2000 ruling in Goldberger v. Integrated Res., 209 F.3d 43, such as time and labor expended and the risks of the litigation.