A recent Law 360 story by Gina Kim, “Mattel Judge Mulls $24.5M Atty Fee Bid in $98M Investor Deal” reports that U.S. District Judge Mark C. Scarsi said he will grant final approval of $98 million in settlements resolving investors' claims that Mattel and PwC misled them by understating an income tax expense, but said he's still considering the class counsel's $24.5 million attorney fee bid. During a hearing, John Rizio-Hamilton, who represents the class and lead investor plaintiffs DeKalb County Employees Retirement System and New Orleans Employees Retirement System, urged Judge Scarsi to approve the fee bid, which he said is 25% of the $98 million deal and consistent with the Ninth Circuit's benchmark for percentage fee awards in common fund cases.
The investors' counsel also sought $1,139,330 in expenses, plus plaintiff awards to DeKalb County and New Orleans for $8,615. Defense counsel for PwC and Mattel did not object to the fee request. Rizio-Hamilton maintained that the reasonableness of the fee request is backed by a lodestar cross-check, which he said yields a multiplier of 2.7. "I know it's 25% of the settlement, but it represents a 2.7 times multiplier of a lodestar calculation," Judge Scarsi began. "Why is this significant upward deviation from the lodestar reasonable in this case?" Rizio-Hamilton said the fee bid comports with the benchmark and "if anything, it's a touch less, because we're requesting 25% of the settlement net of litigation expenses."
The lodestar crosscheck of 2.7 multiplier is actually in the middle range, and is a common figure awarded to comparable class action securities litigations, Rizio-Hamilton said. He cited several cases, such as Vizcaino v. Microsoft Corp., where the Ninth Circuit affirmed an award of 28% of a $97 million settlement, and In re: Brocade Securities Litigation, where class counsel received 25% of a $160 million deal.
Furthermore, the recovery achieved for the class is above average considering the serious risks facing the class, justifying the fee request, Rizio-Hamilton argued. Class counsel dedicated almost 19,000 hours into the case, and incurred more than $1.1 million in expenses to face off against well-funded, high-caliber law firms representing Mattel and PwC, he said.
The class's reaction to the requested fee has also been favorable, and no institutional investor objected to it, Rizio-Hamilton added. Only one individual investor, James J. Hayes of Virginia, objected to the fee request, but those objections are without merit and Hayes doesn't explain why the fee request is purportedly excessive, Rizio-Hamilton said.
Judge Scarsi aired additional concerns he had with the billing rates provided in class counsel's papers, noting that there were hourly rates ranging from $300 to $425 for nonlawyer litigation staff. "Why aren't those high?" Judge Scarsi asked Rizio-Hamilton.
Rizio-Hamilton defended the billing rates charged by nonlawyer staff, arguing that they have been repeatedly accepted by courts in connection with fee applications in similar cases across the nation and in the district. He also cited Volkswagen "Clean Diesel" Marketing, Sales Practices, and Products Liability Litigation" In re: Volkswagen "Clean Diesel" Marketing, Sales Practices, and Products Liability Litigation in the Northern District of California, where the court found hourly rates in that case — up to $490 per hour for nonlawyer paralegals — to be reasonable.
Rizio-Hamilton further contended that the billing rates are consistent with those charged by other firms litigating national securities litigations, including the very defense counsel in the instant Mattel litigation. "We know that because we look at the bankruptcy fee applications they submit," Rizio-Hamilton said. "Suffice it to say, the rates that they submitted to bankruptcy courts are meaningfully higher than the rates we submit here," he said. "On the question of nonlawyer paralegals, for instance, Munger Tolles — and I don't mean to single them out — have submitted rates between $405 to $490 in 2020 for paralegals in the PG&E bankruptcy case in the Northern District of California."
Ultimately, class counsel achieved a recovery that is meaningfully greater than what is typically achieved in comparable cases, considering the time and quality of work poured into the case for more than two years without any payment, he added. Class counsel are only asking for a benchmark, "and not a penny more," Rizio-Hamilton said.
"I do appreciate all the arguments, as you understand, you know, I'm just trying to do the best thing for the class, which is why I'm focusing on the attorney award, and I'll give that a little more thought based on the arguments today," Judge Scarsi said. "So the court will approve the settlement, will issue an order, and you know, the attorneys' fees may not be the 2.7 multiple, so we'll see."