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$96M Fee Award in $480M Well Fargo Investor Settlement

December 19, 2018 | Posted in : Expenses / Costs, Fee Award, Fee Award Factors, Lawyering, Practice Area: Class Action / Mass Tort / MDL

A recent Law 360 story by Lauren Berg, “$480M Wells Fargo Investor Deal OK’d, Attys Get $96M,” reports that a California federal judge granted final approval to a $480 million settlement resolving investor claims that Wells Fargo & Co. artificially inflated its stock value by opening millions of unauthorized customer accounts and awarded the investors' attorneys nearly $96 million for their efforts.  U.S. District Judge Jon Tigar said that the settlement “achieves a good result for the class,” finding that the maximum potential damages it could have won at trial ranged from $353 million to more than $3 billion.

“This recovery is higher than recoveries achieved in other securities fraud class actions of similar size (over $1 billion in estimated damages), which settled for median recoveries of 2.5 percent between 2008 and 2016, and 3 percent in 2017,” Judge Tigar wrote.  The settlement represents an average recovery of about $0.35 per share, once attorneys' fees and other costs are deducted from the fund, according to the order.

The lawsuit, led by Union Asset Management Holding AG, alleged Wells Fargo executives adopted an aggressive cross-selling business model that emphasized pushing multiple products on existing customers rather than attracting new customers.  To meet lofty sales targets, the bank’s employees opened millions of accounts for customers without their consent.

In September 2016, the Los Angeles Times raised questions about the practice, and the bank was soon hit with $185 million in civil penalties by regulators on Sept. 8, 2016.  Its stock price fell 9 percent over the next week, closing at $45.43 per share on Sept. 16, 2016.  The securities suit was filed 10 days later.  The settlement between the bank and anyone who bought its common stock between Feb. 26, 2014, and Sept. 20, 2016, was reached in May.  Wells Fargo has denied the suit’s claims, but said it reached a settlement "to avoid the cost and disruption of further litigation."

After approving the settlement amount Tuesday, Judge Tigar also approved $95.9 million in attorneys’ fees — 20 percent of the settlement amount — finding that that requested amount is reasonable and below the “benchmark” 25 percent.  “Plaintiff’s counsel obtained an excellent result for the class when compared to similar cases, despite comparable risks,” Judge Tigar wrote.

The case is Gary Hefler et al. v. Wells Fargo & Company et al., case number 3:16-cv-05479, in the U.S. District Court for the Northern District of California.