(CN) – Investors objected to the proposed $586 million global settlement of hundreds of securities fraud class actions in Manhattan Federal Court, calling the $251 million demanded by their lawyers “outrageous.”
The class attorneys asked for one-third of the gross settlement, or more than $195 million in fees and $50 million in expenses.
The plaintiffs call the request “outrageous” and say a 33 percent fee is “not permissible in a mega-fund case like this.”
Investors brought 309 separate class actions beginning in late 2000. The complaints charged various companies of violating securities laws in connection with their initial public offerings.
Plaintiffs said the companies’ officers and underwriters artificially inflated stock prices and withheld material information.
U.S. District Judge Shira A. Scheindlin presided over the case.
After lengthy litigation, a settlement was reached in April. The parties agreed to divide $586 million among the 309 cases.
The class attorneys said they spent 677,000 hours on the case and actually accepted less than their lodestar, which totaled $278 million.
But according to the plaintiffs, a study found that the average fee awarded for a class action that settled for more than $100 million was 15.1 percent. Calculated with the average figure, attorney fees for the case would still be more than $88 million.
“This amount would reward Class Counsel more than handsomely for their efforts,” the plaintiffs say.
They argue that many items on the $50 million expense report need to be carefully scrutinized.
Five-star hotels, first-class flights and the cost of maintaining the modern equivalent of each firm’s law library are among the expenses the plaintiffs view as unnecessary.
They also accuse the attorneys of trying to double-bill for contributions made to the litigation fund.
“Class counsel contributed over $14 million to the Litigation Fund, for which they seek reimbursement,” the objection states. “But each firm included its contribution to the fund in its request for reimbursement. Therefore, it is quite possible that Class Counsel is asking this Honorable Court and the Class Members to reimburse it two times for the same expense.”
The plaintiffs want the court to disallow an online legal research fee of more than $5 million and an in-house copy fee of more than $600,000.
They also want a breakdown of all travel and living expenses.