Court: District Court, D. Massachusetts; November 21, 2011; Federal District Court
A class action lawsuit resulted in a judgment against Centennial Technologies, Inc. and its founder Emanuel Pinez for issuing false financial statements and insider trading, leading to significant investor losses. Pinez admitted to disseminating misleading financial information for the years 1994-1996, causing Centennial's stock price to rise from $6 to $55 before plummeting below $2 upon the revelation of the fraud. The judgment against Pinez amounted to $207 million in November 2000, but recovery efforts were challenging. In 2005, Class Counsel identified a financial account linked to Pinez, leading to the Court attaching the account and later awarding $665,320 from it towards the judgment. Following an appeals process, $604,837 was transferred to a Claims Administrator for distribution to the class.
Class Counsel has filed a motion for attorneys' fees amounting to 30% of the common fund and reimbursement of $15,515 in expenses, along with a $30,000 request for the Claims Administrator's fees. The legal standard allows for reasonable fee awards from common funds, with courts exercising discretion in these awards. The First Circuit recognizes two methods for calculating fees: the percentage of fund method (POF) and the lodestar method, noting the POF method's efficiency and market alignment. Typical fee awards in this jurisdiction range from 20-30%, with 25% being the standard benchmark.
In the legal case referenced, Class Counsel requested a fee of 30% of a common fund totaling $604,837, amounting to $181,000, along with $15,515 for out-of-pocket expenses. The request was deemed reasonable given the case's complexity and Class Counsel's efforts to recover funds. However, the total requested represented approximately 38% of the common fund, which was considered excessive relative to similar cases, particularly in light of the Class Plaintiffs receiving only a small fraction of the $207 million judgment awarded. The Court ultimately decided to reduce Class Counsel's fee to 25% of the total collected, awarding $151,200 in fees and $15,515 in expenses. Additionally, the Claims Administrator, Berdon LLP, was awarded $30,000 for its services. The overall award protects the Class Plaintiffs' interests, granting them approximately two-thirds of the recovered amount. The Court's order allowed Class Counsel's motion in part, while denying it in part.
