A recent Law 360 story by Matthew Guarnaccia, “Credit Card Co. Investors Score $2.4M in IPO Suit Atty Fees,” reports that the New York federal judge overseeing a class action lawsuit related to CPI Card Group Inc.’s initial public offering awarded lead counsel Labaton Sucharow LLP $2.37 million in attorneys’ fees and costs, stopping short of the total amount requested by investors for work in reaching an $11 million settlement with the credit card company.  In addition to granting final approval of the settlement, U.S. District Judge Lewis A. Kaplan awarded 20.6 percent of the total amount of the deal as attorneys' fees to Labaton.

The award came in below the 25 percent, or $2.75 million, requested by Labaton, with Judge Kaplan saying he had a few reservations about the lodestar claimed by the firm.  The judge did note, however that his concerns were not about the validity or accuracy of the timekeeping figures provided by lead counsel.  In particular, Judge Kaplan said Labaton reported contributions from 19 attorneys and 14 other timekeepers during the case, and that it is likely this work included “some nontrivial amount of duplication or unnecessary effort.”  The overall number of timekeepers also seemed excessive given the amount of work that was actually done on this case, which included drafting the complaint, litigating class certification and dismissal motions, the defense of a deposition, and settlement negotiations, the judge said.

In addition, Judge Kaplan said the requested lodestar was based on current hourly rates of the timekeepers involved, even though the rates for some increased over the course of the litigation.  “Accordingly, the court has adjusted the lodestar to reflect historical hourly rates to the extent that some differ from current rates and considered the use of current hourly rates in considering the multiplier,” Judge Kaplan wrote.

Judge Kaplan’s final consideration in lowering the lodestar was Labaton’s assertion that more than 2,900 hours was dedicated to the case, which he called “relatively straightforward and not heavily litigated.”  As a result, the judge lowered the total hours sought by 10 percent, leaving a lodestar of approximately $1.5 million, and allowing for a 1.5 percent multiplier, as opposed to the 1.64 multiplier requested by Labaton.

The resulting attorneys’ fee figure is around $2.27 million. Judge Kaplan also tacked on around $106,000 in expenses, but said the lead plaintiff in the case was not entitled to a requested $10,000 award for “time and trouble.”  The fee award by Judge Kaplan comes a little more than a month after the judge gave final approval to a deal that ended the shareholder lawsuit led by investor Alex Stewart.

In his lawsuit, Stewart claimed CPI shipped more than 100 million extra cards to its biggest customers before its October 2015 IPO without telling investors.  Orders allegedly plummeted after the offering because of the "bloated" inventory at financial institutions, as did the initial $10-per-share stock price, which stood at $4.70 a share when the suit was filed in June 2016.  CPI produces 35 percent of all payment cards in the U.S. and serves the majority of the top 20 U.S. debit and credit card issuers, including JPMorgan Chase & Co., American Express Co., Bank of America Corp. and Wells Fargo & Co., according to its U.S. Securities and Exchange Commission registration statement.

The case is In Re: CPI Card Group Inc. Securities Litigation, case number 1:16-cv-04531, in the U.S. District Court for the Southern District of New York.