5th Circuit Lets $40M Dell Settlement Stand

(CN) - The 5th Circuit rejected two appeals from objectors to a $40 million securities fraud settlement between Dell computer and a class of investors.

In a unanimous ruling, a three-judge panel agreed with the Austin Federal Court's denial of motions to reconvene a fairness hearing, issue additional notice to the class, and extend the time for filing claims.

Judge Patrick Higginbotham wrote than an additional fairness hearing was not necessary.

"In this case, the fairness hearing lasted over three hours, and the objectors presented argument and conducted cross-examination," Higginbotham wrote. "Their request to 'continue' the fairness hearing is based on two documents submitted after the fairness hearing: (1) class counsel's receipts for expenses and (2) a declaration of the claims administrator's vice president of operations. But '[a] district court is not required to hold a hearing on a motion for attorneys' fees in a class action,' and there is even less reason to require one on receipts for attorneys' expenses. Furthermore, the Schuleman objectors were not entitled to live testimony and cross-examination of all declarants. A fairness hearing is not a trial. 'Historically, courts have commonly relied on affidavits, declarations, arguments made by counsel, and other materials in the record without also requiring live testimony.' The district court denied the objectors' request because, in its judgment, the objectors 'were afforded full opportunity at the [fairness] hearing to present their objections and remedies.' They have presented no reason to conclude that this judgment was an abuse of discretion."

Higginbotham said that the lower court's decision not to reissue notice or reopen the filing period was correct, that no rules or due process violations took place.

"First, during the filing period, class members did not know with certainty whether the de minimis provision would apply to them. The amount to be paid out per share depended on the total number of claims filed, something no class member could know during the filing period," Higginbotham wrote. "Second, the notice explicitly informed the class members that (1) the plan of allocation was still subject to court approval, (2) the plan could be modified in a way that would affect their personal recovery, and (3) they would not necessarily receive notice of any such changes. The notice was sent to all potential class members, regardless of how much stock they owned, and warned that by doing nothing, they would give up their rights and get no payment. Finally, the objectors point to no cases requiring a second round of notice to class members, nor an extended filing deadline, when a plan of allocation is amended."

The court also disagreed with the argument that the $7.2 million in attorney's fees were not excessive, that interest was correctly awarded and that the correct method was used to come to that amount.

"Without citing law, the Schuleman objectors contend that the fee award of 18% is 'excessive' because the case was dismissed prior to discovery," Higginbotham wrote. "The district court arrived at 18% by looking to class counsel's retainer agreement, which provided for a fee of 18% to 25% of any common fund. Noting the lead plaintiff's sophistication, the district court held that the class counsel's requested 25% fee was 'entitled to a presumption of reasonableness.' The court still opted to adjust the requested award downward to 18%, the lower end of the range in the retainer, reasoning that 18% compensated counsel while protecting the class's interests and accounting for [other] factors. The court explicitly considered the amount and sources of discovery in reaching its decision, and the objectors concede that the district court 'correctly used the [other] factors to help determine a reasonable fee.' That much of counsel's efforts were outside of formal discovery processes does not render them irrelevant. There is no basis here for concluding that the district court abused its discretion in setting the amount of attorneys' fees."

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