A federal judge in New York approved a hotly disputed fee request for lawyers who negotiated a $217 million settlement with Madoff “feeder funds.”  In a 43-page opinion, U.S. District Court Judge Colleen McMahon rejected the New York Attorney General’s objection to a $40.7 million fee request from lawyers led by Lowey Dannenberg who obtained the settlement from Ivy Asset Management on behalf of pension funds that lost money in Bernie Madoff’s Ponzi scheme.

The NYAG argued the fee was excessive because the state had already reached a tentative $140 million settlement and the lawyers didn’t deserve to reap a fee for the AG’s work.  Judge McMahon rejected the state’s argument, however, noting that the AG did little to pursue the settlement further after Ivy demanded a release from related civil suits.  “I will not allow the NYAG to take credit for the settlement that, for whatever reason, it did not obtain,” she wrote.  “Once the prospect of a settlement disappeared, so did the Attorney General.”

Judge McMahon was critical of the thousands of hours Lowey Dannenberg and other firms including Bernstein Liebhard and Cohen Milstein spent reviewing documents.  The private effort required 110 lawyers and more than 67 staff and paralegals, the NYAG said, compared with three lawyers and support staff who combed through the identical set of documents and negotiated a $140 million settlement.

In March, Judge McMahon required the lawyers to hand over their billing records so she could determine whether the hours were justified.  In May, she praised the work of the private lawyers but said she regretted not setting firm ground rules on document review.  She ordered the law firms to cut their hours submitted for document review by 25%, which will reduce the fee below the suggested $40.7 million by an undetermined amount.  Even at the higher level, she noted, it is below the 22% Lowey Dannenberg negotiated with its clients and well below prevailing fee awards in class actions in New York.

NALFA also reported on this case in “New York AG Blasts $42M Fee Request in Madoff Case”