18th Annual Workplace Class Action Report - 2022 Edition

470 Annual Workplace Class Action Litigation Report: 2022 Edition adequate to make any necessary redistribution of attorney compensation. In addition, the Court ruled that the holdback amount of 8% must be taken from the portion of the recovery designated for attorney compensation and not from Plaintiffs’ net recovery. Id. at 552. For these reasons, the Court granted in part and denied in part lead counsel’s fee award. In Re Valeant Pharmaceuticals International, Inc. Securities Litigation, 2021 U.S. Dist. LEXIS 18894 (D.N.J. Feb. 1, 2021). Plaintiffs, a group of investors in Valeant stock, filed a class action asserting violations of the Securities Exchange Act of 1934. Plaintiffs claimed that Defendants used deceptive practices and a clandestine system of third-parties to block generic drugs from competing with Defendants’ pharmaceuticals, thereby artificially inflating Valeant’s stock price. Once Valeant’s stock price dropped from $250 to under $10 in two years, the federal government opened an investigation into Defendants and a number of Plaintiffs filed securities class actions against Defendants. Plaintiffs’ action represented a consolidation of these analogous class action suits. After nearly five years of litigation, the parties agreed to settle for approximately $1.2 billion in November 2019. Plaintiffs subsequently moved for final approval of the class action settlement and attorneys’ fee award, and the special master recommended granting the motion. Plaintiffs thereafter filed a motion to adopt the special master’s report, which the Court granted. Of the approximately 400,000 class members, two objected to adopting the special master’s report, including Timber Hill LLC (“Timber Hill”) and Cathy Lochridge (“Lochridge”). Timber Hill contended that the settlement plan of allocation (“POA”) imposed an arbitrary 5% recovery cap on options investors, while allowing common stock and debtor investors to recover the remaining 95%. Id. at *34. In rejecting that objection, the Court reasoned that over 20 other securities class actions have accepted the use of an options cap, and Timber Hill’s only support for its argument was its expert’s “empirical analysis.” Id. at *35. Since Timber Hill’s expert also originally supported an options cap of 5.35% before altering their analysis, the Court held that the POA was fair, reasonable, and adequate. Lochridge objected to the POA on the basis of Lead Counsel’s request for attorneys’ fees of 13% of the settlement fund, claiming that the “‘settlement captures just 3% of class damages, the lowest return in the history of these large-scale securities settlements.’” Id. at *38-39. The Court assessed Lochridge’s argument by considering the Third Circuit’s list of factors regarding whether attorneys’ fees are reasonable. To that end, the Court noted that Plaintiffs’ settlement amount was the ninth largest securities class action recovery ever, and that Lochridge merely speculated that Defendants could have paid more despite the company’s uncertain financial status. Id. at *41-42. With respect to the class as a whole, the Court found that the low number of objections and opt-outs weighed in favor of settlement approval, as only 311 of the approximately 400,000 class members opted-out. The Court also concluded that Lead Counsel appropriately handled this complex class action, especially in light of the nearly five-year litigation and the fact that Lead Counsel expended over 75,000 hours on this case. Therefore, the Court granted Plaintiffs’ motion to adopt the special master’s report for an attorneys’ fee award of $157.3 million. In Re Wells Fargo & Co. Shareholder Derivative Litigation , 2021 U.S. App. LEXIS 10969 (9th Cir. April 16, 2021). An objector, Edward Cochran, appealed the District Court’s award of attorneys’ fees in a shareholder derivative action brought on behalf of Wells Fargo & Co. against the company’s management. Id . at *2. The District Court originally had granted attorneys’ fees on the percentage of recovery method and found that a 22% award was appropriate given the results achieved and the burden endured by class counsel. The District Court utilized the lodestar method to check the reasonableness of the attorneys’ fee award, and the cross-check analysis established that the fee award was reasonable. On appeal, the Ninth Circuit affirmed the District Court’s ruling. The Ninth Circuit found no abuse of discretion in the District Court’s fee calculation. Cochran argued that the District Court should have used a lower benchmark percentage in calculating the fee award. Cochran based his suggested 11% benchmark on a document in an unrelated case and the Ninth Circuit found no merit with the suggestion, as it was not relevant to the fee calculation. In the alternative, Cochran proposed a 17.5% benchmark based on a study reflecting that the mean percentage of recovery in connection with settlements of this size was 17.9%. Id . at *3. However, the Ninth Circuit concluded that the District Court had considered the study with the 17.9% benchmark, and that the circumstances suggesting that percentage weighed in favor of a reduced award. As a result, the Ninth Circuit ruled that the District Court had appropriately weighed all factors in reaching a reasonable percentage. Accordingly, the Ninth Circuit affirmed the District Court’s fee award. Kater, et al. v. Churchill Downs Inc., 2021 U.S. Dist. LEXIS 26734 (W.D. Wash. Feb. 11, 2021). Plaintiffs filed a class action alleging that Defendant violated Washington’s Recovery of Money Lost (“RMLGA”) at Gambling