Risk & Compliance

Judge Halves Lawyer Fees in Class Action

In a suit against Bristol-Myers Squibb, plaintiffs' attorneys sought a ''windfall,'' according to the ruling.
Stephen TaubMarch 1, 2005

Potential corporate defendants of shareholder class-action lawsuits have yet another reason to breathe a sigh of relief, following the enactment the Class Action Fairness Act. President Bush last month signed the measure, which will make it much harder for individuals to sue corporations.

Lawyers fees could be cut, too, if a recent decision indicates a trend. In the decision, a federal judge awarded plaintiffs’ attorneys a bit more than half of the fees they requested from a securities class action lawsuit against Bristol-Myers Squibb, essentially because she felt the case was a much easier one for them to handle than their charges indicated, according to the New York Law Journal.

Calling what the lawyers were seeking from the $300 million settlement a “windfall,” Southern District Judge Loretta Preska awarded $12 million in attorney fees to Bernstein Litowitz Berger & Grossman and Berman DeValerio Pease Tabacco Burt & Pucillo. They had asked for 7.5 percent of the settlement amount, or around $22 million, for serving as co-lead plaintiffs’ counsel.

“[I]t is not 30 times more difficult to settle a $30 million case as it is to settle a $1 million case,” Preska reportedly wrote.

The lawsuit stems from Bristol-Myers’ $2 billion investment in biotechnology company ImClone Systems. The suit also reportedly alleged that improper accounting practices by Bristol-Myers led to a restatement of earnings in 2002.

The suit charged that Bristol-Myers executives had made overly optimistic, false, and misleading statements about the company’s investment in ImClone. Its former chairman Sam Waksal was eventually sentenced to prison for insider-trading charges. Martha Stewart is currently winding down her prison term stemming from her conviction on obstruction charges related to inquiries into her ImClone stock trades.

The lawsuit also alleged that Bristol-Myers engaged in practices designed to inflate its reported revenue, according to the journal.

Last August, Bristol-Myers agreed to pay $150 million to settle Securities and Exchange Commission charges that alleged the pharmaceutical giant inflated sales and earnings to fool investors.

Preska reportedly wrote in her decision that the case “fell along the low end of the continuum of risks” for the plaintiffs’ lawyers. She specifically pointed out that the statements regarding ImClone were already in the public record as were the restatements, the law publication reported.

“Neither the facts nor the legal and accounting theories were complicated. Among securities class actions, this case as a whole was neither unique nor complex,” she wrote.

Preska also said the plaintiff lawyers’ fees should be lowered because the attorneys benefited from the existence of an SEC action based on similar facts, according to the journal.

“That the complaint had been dismissed with prejudice and, while the appeal was pending, the parties reached a settlement agreement that was executed just five days before filing and simultaneous settlement of the SEC action suggests that it was the company’s desire, prompted by the SEC, to put its house in order that caused the settlement, not any action on the part of lead counsel,” the judge also reportedly wrote.