A recent BLT Blog post, “Fannie Mae Securities Class Action Lawyers Seek $44M,” reports that the plaintiffs’ lawyers are seeking 22 percent of the $153 million settlement fund – about $29.1 million in attorney fees and about $15.2 million for expenses.  Fannie Mae and its former auditor, KPMG LLP, reached the settlement in the securities fraud class action earlier this year.

Former Fannie Mae investors, led by the Ohio attorney general’s office on behalf of state pension plans, sued Fannie Mae and its auditor, KPMG, in 2004.  The class accused the mortgage giant of violating federal securities laws by manipulating earnings and violating guidelines known as generally accepted accounting principles.

The quest for attorney fees has been smooth so far.  No class members have filed an objection to the settlement, which included notice that their lawyers would be seeking the maximum of 22 percent of the settlement in fees and up to $17 million in expenses.  Class members have until September 30 to file objections.

In their motion for fees, the plaintiffs’ lawyers said they earned the fees after nine years of complex litigation.  The settlement – which they described as the largest securities class action recovery in Washington—“did not come without a massive investment of resources, both time and treasure.”  The plaintiffs’ lawyers spend nearly 300,000 hours on the case, which they handled on a contingency fee basis, according to the motion.  The lodestar calculation of the fees came out to about $94 million.

“A risk of non-payment generally counsels in favor of increasing the fee award to attorneys who secure a recovery for their client,” they argued.  “Courts are aware that without such incentive, plaintiffs’ lawyers might be less willing to take on cases that involve either unsettled legal issues or clients who might otherwise go unrepresented.” 

The risks facing plaintiffs’ counsel escalated in the months leading up to the settlement.  U.S. District Judge Richard Leon and dismissed several former Fannie Mae executives as individual defendants in the case, finding the plaintiffs didn’t produce enough evidence that they acted with intent to deceive, and he was weighting the defendants’ joint motion to dismiss.