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Federal Judge to Hear Attorney Fee Expert in Acacia Fee Dispute

December 27, 2018 | Posted in : Expenses / Costs, Fee Calculation Method, Fee Dispute, Fee Expert / Member, Hourly Rates

A recent Law 360 story by Aaron Leibowitz, “Mass. Judge to Hear Expert in $1.75M Acacia Atty Fee Fight,” reports that a Boston federal judge said he wants to hear from an expert before deciding a dispute over a $1.75 million attorneys’ fee proposition from Acacia Communications Inc. shareholders, but approved a settlement between the shareholders and the fiber optics company in their insider trading case.  In putting forward that figure, the shareholders' attorneys said the internal reforms proposed in the settlement deal would increase stockholder value.  They filed a declaration by Harvard Law School scholar Matthew D. Cain, who estimated the changes would net between $68 million and $82 million for Acacia shareholders.

U.S. District Judge William G. Young said that he would like to hear from Cain directly as he tried to put a dollar value on work in a settlement that is not monetary, but rather involves changes to the oversight of insider trading at Acacia.  "I will be more comfortable having heard this expert," Judge Young said, noting that Acacia's attorneys would be allowed to cross-examine the expert.  He was skeptical of a request by Acacia to depose the scholar before he appears in court, but said he would consider it.

The consolidated cases set to be resolved allege that Acacia executives and private equity backers obtained early releases from insider trading agreements, allowing them to sell off their shares two weeks before announcements from the company's two largest customers led to a significant drop in Acacia's stock price.

"You say you are the catalyst that caused [these reforms] to be put in place," Judge Young said to the shareholders' attorneys.  "How are you gonna value it?"

Geoffrey Johnson of Scott & Scott Attorneys at Law LLP, representing the shareholders, said it's more of an art than a science, but he said the Harvard expert used "very conservative assumptions" on how the reforms would boost Acacia's worth.  In a court filing last month, the shareholders' attorneys said they expended nearly 1,690 hours on the case and used a multiplier of 1.72 to calculate the award.  They asked to be reimbursed for about $34,000 in expenses.

But Acacia has said the $1.75 million calculation is unreasonable, pointing to a settlement in a recent case involving internal reforms at Aveo Pharmaceuticals in which the plaintiffs requested over $800,000 in attorneys' fees, but were instead awarded about $200,000 by U.S. District Judge Denise J. Casper, also in Boston.  "The requested fee here is just way too high," Daniel Halston of WilmerHale, representing Acacia, told the judge. "It's just out of bounds."

Judge Young said he had no issue with the settlement itself.  He rescheduled an afternoon hearing to the morning so he could hear arguments on the fees first, but held the afternoon session in case anyone showed up to object to the deal.  When no one objected — the only people in the gallery were a lawyer and a reporter — the judge gave his formal approval.

The case is Tharp et al. v. Acacia Communications et al., case number 1:17-cv-11504, in the U.S. District Court for the District of Massachusetts.