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Chun v. Board of Trustees of the Employees' Retirement System of State of Hawaii1/31/2005
two settlement mediators, "agree that Pacific Enterprises would receive $12 million from its officers' and directors' insurers and [the auditor]" and that the " ttorneys for the derivative plaintiffs would receive $8 million out of this $12 million award," i.e., a sixty-six and two-thirds percent award. Id. Although the parties reached a settlement with respect to the securities litigation, " inal approval of both settlements conditioned on the defendants' demand that the two settlements be linked," such that, " f either settlement vacated, both settlements [were] void."
Although Weinstein, who owned stock in Pacific Enterprises, had joined the derivative lawsuit, thereby accepting the co-lead counsel, he "objected to the proposed derivative settlement," contending "that the district court did not have jurisdiction over the derivative claims and that the proposed derivative settlement would be unjust." Id. More than 1700 shareholders joined Weinstein's objections, and the federal district court "agreed with Weinstein that an $8 million fee award for the derivative attorneys appeared excessive." Id. at 375-76. Plaintiffs' counsel voluntarily "reduced their derivative fee request from $8 million to $4 million, and [the district court] approved the global settlements and dismissed both actions." Id. at 376.
As recited supra, on appeal to the Ninth Circuit, Weinstein did not argue that the twenty-five percent benchmark was a more appropriate measure of attorneys' fees, but rather maintained that "the attorneys should not [have] receive any fees because of the low recovery in the derivative lawsuit." Id. at 379 (emphasis added). The Ninth Circuit acknowledged the same twenty-five percent "benchmark" for attorneys' fees and the exception for "special circumstances" as was noted by Torrisi and Graulty, see supra note 17, and plaintiffs' counsel asserted several grounds that could have qualified as "special circumstances,"e.g., "the complexity of the issues and the risks." Id. Nevertheless, the Ninth Circuit held that, inasmuch as "Weinstein failed to respond to [plaintiffs' counsels'] arguments," the court could not conclude, "on record [before it], that the district court's award of fees was an abuse of discretion." Id.
In the present matter, Pacific Enterprises is unhelpful to the Retirees primarily because the Ninth Circuit did not, as the Retirees suggest, "h ld that special circumstances existed to deviate upwards from the twenty-five percent benchmark to one-third of the amount recovered." Indeed, as explained supra,Pacific Enterprises never actually reached the issue of whether such "special circumstances" existed at all, inasmuch as Weinstein completely failed to respond to the contentions of the plaintiffs' counsel, such that the plaintiffs' counsel essentially prevailed by default. Id. Moreover, unlike the instant case, in which we are asked to determine whether an award of thirty-three and one-third percent of the common fund would be more appropriate than the twenty-five percent awarded by the circuit court, the Ninth Circuit in Pacific Enterprises addressed Weinstein's contention that the plaintiffs' counsel should receive no remuneration, as opposed to the one-third of the common fund awarded by the federal district court. It is also noteworthy that the present matter does not concern complex, consolidated derivative and securities lawsuits.
Gunter is likewise inapposite to the present matter. In Gunter, a "common fund" class action, the plaintiff class members did not object to the plaintiffs' attorneys' application for attorneys' fees, which "amount to one-third of the settlement amount." 223 F.3d at 191. The federal district court, however, "allowed fee
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