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Attorneys’ Fees Properly Awarded in Securities Class Settlement

May 23, 2019, 4:38 PM

Bernstein Litowitz Berger & Grossmann LLP properly received a percentage of a class settlement as a representation fee, the Second Circuit said May 23.

A trust that was part of the securities class wanted the fees calculated using the lodestar method because of a fee-shifting statute. But courts can award fees from common funds using a lodestar or percentage method, the U.S. Court of Appeals for the Second Circuit said, affirming the district court.

Bernstein Litowitz represented the class against BioScrip Inc. for allegedly misleading investors about an investigation into a kickback scheme at the company. The parties settled in 2016 and created a common fund of $10.9 million. The district court awarded the firm about $2.725 million—25% of the settlement—in fees and almost $134,000 more in expenses.

The trust objected to the fee award and argued that Bernstein Litowitz should be paid using the lodestar method because the class brought its claims under securities statutes requiring fee-shifting, which entitles class attorneys to fees financed by the defendants.

But even if a fee-shifting statute applied, "[f]ee‐shifting principles and the common‐fund doctrine occupy separate realms,” the opinion said. Fee-shifting acts as a tax on losing defendants, while common fund principles “instead confer a benefit on the victorious attorney” for their representation of the class, the court said.

Common funds allow an attorney “who secures a fund for the benefit of others to collect a fee directly from the fund,” the opinion said. How an attorney earns a fee “can affect the method used to calculate what a reasonable fee is.” When an attorney’s work leads to the creation of a common fund, then common-fund principles apply, and a “fee award may be calculated as the lodestar or as a percentage.”

Judge Rosemary S. Pooler wrote the opinion, which Judges Dennis Jacobs and Richard C. Wesley joined.

Bernstein Litowitz Berger & Grossmann LLP represented the class. Eric Alan Isaacson of La Jolla, Calif. represented the objector.

The case is Fresno Cty. Emps. Ret. Ass’n v. Isaacson/Weaver Family Tr., 2d Cir., No. 17-02662, affirmed 5/23/19.

To contact the reporter on this story: Jennifer Bennett in Washington at jbennett@bloomberglaw.com

To contact the editors responsible for this story: Jo-el J. Meyer at jmeyer@bloomberglaw.com; Nicholas Datlowe at ndatlowe@bloomberglaw.com