A recent Reuters story, “Judge Singles out Ohio Firm in Trimming Fee Award in BofA Case,” reports that the judge who gave his blessing to Bank of America’s $2.43 billion MDL settlement with investors trimmed the total legal fees awarded in the case after challenging the fee request of a small Ohio firm that never appeared before him. Judge Kevin Castel of U.S. District Court in Manhattan last week cut the proposed $158 million in plaintiffs’ lawyers fees to $152.4 million, after rejecting a fee award sought by Flanagan Lieberman Hoffman & Swaim of Dayton, Ohio.
The three lead plaintiffs’ firms, Bernstein Litowitz Berger & Grossman and Kaplan Fox & Kilsheimer, both of New York, and Kessler Topaz Meltzer & Check of Radnor, Pennsylvania, all had supported Flanagan Lieberman’s fee request. But Castel said the firm, which served as an additional counsel for two Ohio pension funds that were plaintiffs in the case, should seek its fees from the state of Ohio, not the class.
In the unerlying case, Bank of America had agreed to buy Merrill in an all-stock deal initially valued at $50 billion on Sept. 15, 2008, the same day that Lehman Brothers Holdings Inc. went bankrupt. But Merill ended up losing $15.84 billion in that year's fourth quarter, even as it awarded $3.62 billion of bonuses to employees. Bank of America ultimately obtained a federal bailout, since repaid, to absorb Merrill. Shareholders said Merrill's mounting losses and bonus plans should have been disclosed before investors voted on the merger in December 2008.
Flanagan Lieberman had sought $3.4 million, plus a multiplier that would have made its net payment $6 million. In a declaration filed with the court, the firm had said it regularly consulted with the pension plans, reviewed pleadings and helped with discovery requests, among other duties. But the firm’s role in the case was news to Castel. It never entered a notice of appearance with the court and was not mentioned in briefs, the judge said at a hearing.
Judges have broad discretion in awarding legal fees in class action cases. But they don’t typically single out a firm in deciding not to award the amount requested, especially when there were no objections to the fee request, said Brian Fitzpatrick, a professor of law at Vanderbilt Law School who has researched class action litigation.
Though Castel did not accuse Flanagan Lieberman of wrongdoing, he suggested it was a “hanger-onner,” trying to profit off the class at the last minute. Castel ultimately told Lieberman his firm should petition the state of Ohio for its fees. He also ruled that the lead plaintiffs’ firms could not share any portion of their fees with any other law firm without a court order.
The $2.43 billion MDL settlement is one of the largest investor settlements stemming from the recent global financial crisis. The case is In re Bank of America Corp Securities Derivative and Employee Retirement Security Act (ERISA) Litigation, U.S. District Court, Southern District of New York. For more on this case, visit http://www.boasecuritieslitigation.com/.