U.S. District Judge Deborah K. Chasanow approved a $3.6 million settlement in a stock-drop suit against Coventry Health Care Inc. The class action claimed Coventry executives breached their Employee Retirement Income Security Act-imposed fiduciary duties by offering Coventry stock as a plan investment option at a time when the company was allegedly making misrepresentations about its business condition.  The case, Boyd v. Coventry Health Care Inc., was in U.S. District Court for the District of Maryland. 

Chasanow awarded class counsel $1 million in attorney fees, which represents about 28 percent of the recovery, and $137,316 in expenses.  Class counsel requested fees of $1.2 million—or 33 percent of the recovery—but Chasanow reduced that amount after considering fee awards in similar cases.  Last year, the U.S. District Court for the Eastern District of Michigan awarded class counsel fees of $900,000, representing 30 percent of the $3 million recovery they obtained in similar stock-drop action.

Although the court found that counsel’s obtainment of a $3.6 million recovery was “commendable” given the challenges posed by stock-drop litigation, it nevertheless found that a 33 percent fee award wasn’t warranted.  The court said that attorney fee awards in complex litigation generally vary between 25 percent and 30 percent of the total recovery.

Looking specifically at four similar cases decided within the Fourth Circuit since 2001, the court said that attorneys’ fees ranged from 25 percent to 28 percent of the total recovery.  Further, the court said, fee awards in comparable ERISA cases throughout the country ranged between 19 percent and 45 percent, but typically fell between 30 and 33 percent of the total recovery.

“Striking the balance between the percentage awarded in cases in this circuit for an award of this magnitude and those given in cases of this type across the nation, $1 million---approximately 28 percent—would appear to be an appropriate number,” the court concluded.  Further, the court said that the $1 million award took into account both the complexity and duration of the case, because while the litigation was “protracted and complex,” discovery in the case was “relatively straightforward.”