Law School Case Brief
In re Sunbeam Sec. Litig. - 176 F. Supp. 2d 1323 (S.D. Fla. 2001)
Caselaw has clarified the factors to which a district court is to look in determining a reasonable percentage to award class-action counsel. These factors are: (1) the time and labor required; (2) the novelty and difficulty of the questions involved; (3) the skill requisite to perform the legal service properly; (4) the preclusion of other employment by the attorney due to acceptance of the case; (5) the customary fee; (6) whether the fee is fixed or contingent; (7) time limitations imposed by the client or the circumstances; (8) the amount involved and the results obtained; (9) the experience, reputation, and ability of the attorneys; (10) the "undesirability" of the case; (11) the nature and the length of the professional relationship with the client; (12) awards in similar cases. Other pertinent factors are the time required to reach a settlement, whether there are any substantial objections by class members or other parties to the settlement terms or the fees requested by counsel, any non-monetary benefits conferred upon the class by the settlement, and the economics involved in prosecuting a class action. As a final note, the Eleventh Circuit encourages the lower courts to consider additional factors unique to the particular case.
Defendant Arthur Andersen LLP ("AA"), a firm of certified public accountants with offices located nationwide, served as Sunbeam's (“corporation”) independent outside auditor prior to and during the class period (April 23, 1997 through June 30, 1998). AA was implicated in the officer's securities fraud scheme because of its certification of what turned out to be fraudulent corporate financial records used to artificially inflate the price of the corporation's stock. Plaintiff shareholders brought a fraud action against the accounting firm pursuant to S.E.C. Rule 10b-5, but eventually the parties submitted a proposed settlement and a plan for allocation for the United States District Court's approval. The Court sought to determine whether the proposed settlement was "fair, adequate and reasonable," and the amount of attorney fees to be paid from the settlement fund.
In plaintiff shareholders' class action alleging securities fraud action pursuant to S.E.C. Rule 10b-5 by defendant, a national accounting firm hired as an independent auditor by corporate officers, was the proposed settlement "fair, adequate and reasonable" such that it should be approved by the court?
The United States District Court found that the proposed settlement and plan for allocation between defendant accounting firm and plaintiff shareholders in a securities fraud action was fair, adequate, and reasonable and entered a final judgment adopting and ordering the terms of the approved settlement. In addition, the Court awarded what it held was a reasonable attorney fee of 25 percent of the settlement fund. In reaching its decision, the Court examined the proposed settlement by many factors, such as the likelihood of the shareholders succeeding at trial, the complexity of the evidentiary issues, the expense of the litigation, and the projected commitment of judicial resources, and concluded that the settlement was "fair, adequate, and reasonable." In determining the award of reasonable attorney fees, the Court examined multiple factors, such as the complexity of the litigation, the skill and experience of the litigators, the amount of recovery, and customary fees in similar cases.
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