United States Court of Appeals For the Seventh Circuit
Civil Procedure — class actions — attorney fees
Where no institutional investors objected to plaintiffs’ attorneys in a class action being awarded 27.5 percent of the $200 million settlement, the district court’s approval of the settlement is affirmed.
“A district judge, looking out for the interests of all class members, sometimes must consider issues that the class representatives and their lawyers prefer to let pass. This is not such a situation, however. Institutional investors such as pension funds and university endowments hold claims to more than 70% of the settlement fund. These institutional investors have in-house counsel with fiduciary duties to protect the beneficiaries. That these large investors, looking out for themselves, help to protect the interests of class members with smaller stakes is a premise of several rules in the Private Securities Litigation Reform Act of 1995. The difference between 27.5% of $200 million and a smaller award (say, one averaging 20%) could be a tidy sum for institutional investors (including this suit’s lead plaintiff, a pension fund), one worth a complaint to the district judge if the lawyers’ cut seems too high. Yet none of the institutional investors has protested—either by filing a motion asking the judge to reduce the fees or by supporting Falkner’s position in this court. This award may be at the outer limit of reasonableness, but, given the way the subject was litigated in the district court, deferential appellate review means that the decision must stand.”
Appeals from the United States District Court for the Northern District of Illinois, St. Eve, J., Easterbrook, J.