Wells Fargo to Pay $500k in Legal Fees, not $1.8M
(CN) - Wells Fargo shareholders whose lawsuits spurred certain corporate governance reforms deserve only about a quarter of their demand for attorneys' fees, a federal judge ruled.
The separate, but otherwise "indistinguishable," derivative class actions accused Wells Fargo and Wachovia of corporate mismanagement, breach of fiduciary duty, waste of corporate assets, indemnification and unjust enrichment.
In Feuer v. Thompson, in January 2010, J.N. Feuer and other shareholders claimed that former Wachovia officers and directors breached their fiduciary duty by purchasing Golden West Bank, and "disregarded the risks undertaken by Wachovia with respect to the packaging of subprime mortgages into collateralized debt obligations and other securities," according to the ruling.
W.M. Rogers led the second action, Rogers v. Thompson, in January 2012.
"The claims against Wells Fargo directors arise out of their failure to pursue these claims against the former officers and director of Wachovia, and for approving a no-consideration settlement in Arace v. Thompson et al., which purported to release virtually any and all claims against the former officers and directors of Wachovia (including many of the claims brought in the Feuer and Rogers actions)," the ruling states.
U.S. District Judge Yvonne Gonzalez Rogers noted Friday that Richard Greenfield and Ilene Freier Brookler, of Greenfield Goodman in Manhattan, and Rose Luzon, of Shephard Finkelman Miller & Shah in San Diego, represented the plaintiffs in both federal actions, which were consolidated in California's Northern District.
After the parties reach a nonmonetary settlement that required Wells Fargo to implement certain corporate governance reforms, lawyers for the shareholders demanded $1.8 million in attorneys' fees.
Rogers called this request too high, however, and awarded them just $500,000.
"Counsel portray the case as highly complex and extremely difficult, their labors as extensive and the results achieved by the settlement outstanding," she wrote. "Despite this portrayal, they have provided scant support for their assertions and inapposite cases to show that the requested fee award is reasonable. While the benefits conferred upon Wells Fargo and its shareholders from these remedial measures form an adequate basis to warrant an award of attorneys' fees, the fees requested are way out of proportion to the benefit conferred upon Wells Fargo and its shareholders."
The promised reform from the settlement requires Wells Fargo to adopt an Acquisition Oversight Policy. In addition, the Wells Fargo board's Risk Committee will retain an outside consultant each year, for three years, to advise it on risk concerns.
Rogers remarked that "the benefit achieved by the litigation here was modest and of limited duration." She also found that "the records show excessive billing," and that there was "very little substantive work" in both actions.
"The only substantive work in the Feuer action was the pre-suit demand, drafting two complaints, and drafting an opposition to the defendants' motions to dismiss," she said. "The only substantive activity in the Rogers action was the filing of the initial complaint."
As such, $500,000 is more than enough consideration, according to the ruling.
"The court considers this award generous in the circumstances," she said.