NY Firm Gets $56 Million Fee, Firm’s Largest Ever, in Backdating Suit

New York Lawyer | June 25, 2010;   By Nate Raymond ;  A federal judge in Brooklyn has approved a $56 million fee for Pomerantz Haudek Grossman & Gross for its work as lead counsel in a class action over alleged backdating against Comverse Technology, Inc. Eastern District Court Judge Nicholas Garaufis yesterday approved a fee of 25 percent of a $225 million settlement, which the judge also signed off on in In re Comverse Technology Inc. Securities Litigation, 06-CV-1825.

A state retirement fund in Pennsylvania had objected to the fees as too large, but the judge said he was unwilling to interfere with an award negotiated openly between the law firm and its client, lead plaintiff Menora Group.

Marc Gross, a name partner at Pomerantz Haudek, based in New York, said the fee award „is the largest in our 75-year history.“ The firm stood at one time to earn up to 30 percent, but ultimately cut its fee after Menora Group „pressed us to take some reduction,“ he said.

„Ultimately the 25 percent that was agreed upon was well within the normative range of these types of lawsuits,“ Mr. Gross said.

Comverse in December agreed to the $225 million settlement, the second largest in a case involving backdating. A number of companies including Comverse came under scrutiny for allegedly issuing options with dates earlier than when they were actually granted.

Comverse’s former CEO, Jacob „Kobi“ Alexander, fled to Namibia after the federal government charged him and the company’s chief financial officer and general counsel in 2006 with criminal fraud.

Comverse will pay $165 million of the settlement. Mr. Alexander, still abroad, agreed to pay $60 million.

Joseph S. Allerhand, a lawyer for Comverse at Weil, Gotshal & Manges, declined to comment. Edward M. Spiro, a lawyer for Mr. Alexander at Morvillo, Abramowitz, Grand, Iason, Anello & Bohrer, had no comment.

Pomerantz was originally slated to receive 30 percent of any recovery, but after the settlement was reached, Menora Group and the firm engaged in „vigorous negotiations“ over the fee award, according to an affidavit by Assaf David-Margalit, an in-house attorney in the investment division of Menora Mivtachim Pensions, Ltd. Menora Group also consulted with independent counsel about Pomerantz Haudek’s fee award.

The Pomerantz firm has 25 lawyers, 13 of whom are partners.

Three objections to the $56.25 million fee award were presented to Judge Garaufis, though one was later withdrawn and the other the judge deemed frivolous. The third, by the Pennsylvania State Employees‘ Retirement System, objected to the fees as „unreasonable.“ In a letter to the judge, Brian McDonough, deputy chief counsel at the retirement system, argued that a 25 percent fee award was not necessary „to provide reasonable compensation to class counsel for their efforts.“

But Judge Garaufis noted that the 25 percent fee Pomerantz Haudek was seeking was lower than other fee awards in „megafund“ securities fraud cases in the Second Circuit. Those included a 33.3 percent fee in a $586 million settlement from banks over initial public offerings, and a 28 percent fee awarded in 2003 for a $300 million settlement against Oxford Health Plans Inc.

Judge Garaufis noted that other courts had applied a „sliding-scale“ approach to fee awards to avoid unwarranted windfalls for the class counsel. But the judge said that method was „inapplicable“ in this case, since the contingency fee was the result of negotiation between Pomerantz Haudek and Menora.

„The fact that this fee request is the product of arm’s-length negotiation between [Pomerantz Haudek] and the lead plaintiff is significant,“ Judge Garaufis wrote.

No matter the method used to calculate a suitable fee, Judge Garaufis said the court’s „primary goal when awarding fees is to approximate the prevailing market rate for counsel’s services.“

In this case, Menora Group at the outset contracted for a 30 percent fee, and after the settlement amount was determined, negotiated a 25 percent fee request. The judge said he saw no reason to impose his own assessment on Pomerantz Haudek’s value „when the retainer and fee agreements speak for themselves.“

Judge Garaufis noted that Pomerantz Haudek invested 43,573 hours of attorney and support time in the case and over $1.6 million of its own money. And while it was „perhaps not as enormous as some other recent securities class actions, it was large, protracted, and bitterly contested,“ the judge said.

In summary, the 25 percent fee would be „certainly sufficient incentive to pursue securities cases of this magnitude,“ Judge Garaufis said.

„And while it may be that a lower percentage would also be sufficient, this court will not pretend that it has the expertise necessary to divine the ideal percentage or construct an accurate sliding fee scale,“ the judge wrote.

„This court is particularly unwilling to undertake an endeavor in a case where the fee award was set on the open market, and where an improperly calibrated fee would provide a disincentive to future counsel to take risks and pursue large class settlements that the SEC cannot.“

Dieser Beitrag wurde unter Allgemein veröffentlicht. Setze ein Lesezeichen auf den Permalink.

Schreibe einen Kommentar

Deine E-Mail-Adresse wird nicht veröffentlicht. Erforderliche Felder sind mit * markiert