Court Trims Firms' Fee Award in Citigroup Accord
Finding billing rates too high, a Southern District judge has cut $30 million from plaintiffs firms' fee request in a bondholder settlement with Citigroup Inc.
The approved award of $116.8 million represents 16 percent of the $730 million settlement. Plaintiffs attorneys, including lead counsel Bernstein Litowitz Berger & Grossmann, had requested 20 percent, or about $146 million, plus interest.
While Judge Sidney Stein (See Profile) said the settlement result was impressive, he questioned whether the proposed blended rate for staff attorneys at $385 an hour "actually reflects what a reasonable client would pay."
The class-action lawsuit In re Citigroup Bond Litigation, 08-civ-9522, claimed investors, including public pensions funds and individuals, were misled by the bank's disclosures when they purchased bonds and preferred stock.
Citigroup was represented by Brad Karp, chair of Paul, Weiss, Rifkind, Wharton & Garrison.
In August, Stein approved the $730 million settlement, which is among the largest in a securities class action growing out of the financial crisis.
In support of their fee request, plaintiffs firms pointed to significant recoveries in which courts awarded fees up to 33 percent, and noted that lead plaintiffs in this case approved the fee application and that a 20 percent fee is permitted under the retainer agreement.
In his Dec. 19 ruling, Stein noted that in many other cases, the percentage fee awarded in settlements as large as this one is "typically lower—often substantially lower" than 20 percent.
Stein noted that the median percentage fee award in recent years of settlements in the $550 to $800 million range was 16.5 percent. And in Carlson v. Xerox, 596 F.Supp.2d 400 (2009), a Connecticut federal court awarded 16 percent of a $750 million settlement.
Stein said he found these two percentages "informative in determining a reasonable percentage fee that balances the need to provide plaintiffs' counsel with adequate compensation and the desire to prevent attorneys from recovering windfalls in megafund cases."