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$3M more for Wyeth shareholders after CCAF objection

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A few years back, I argued an objection to an appalling settlement in district court. The attorneys got paid and the defendant made a meaningless label change; it was basically identical the Dry Max Pampers settlement without even the fig leaf of cy pres or an impossible refund process. The judge gave an oral ruling from the bench. He praised my diligence and good faith to the sky, and let me know how much he appreciated my taking the trouble to object. And then he rubber-stamped the settlement and gave class counsel everything they asked for. (In hindsight, we should have appealed, but we already had a lot of appeals pending and took our lumps.)

Yesterday, I had the opposite experience. In response to our objection in Wyeth Securities, the district court essentially adopted every bad-mouthing lie and misrepresentation class counsel made about what a terrible person I was, making a series of wrong legal rulings along the way and ignoring one of our actual legal arguments to successfully knock down class counsel's straw-man characterization of it. But when push came to shove, the judge gave us a lot of what my client wanted: an 18.4% reduction in an excessive fee request, meaning $3,037,500 more for the class.

Between a judge saying nice things to me and letting a class get ripped off and a judge saying mean things about me but at least partially looking out for the class, I'm sure class counsel would have preferred the former. (We know that plaintiffs' attorneys prefer $3 million in cash to Ted Frank being insulted because no one in the plaintiffs' bar has offered me a $3 million contract to quit class-action work to focus on writing reviews of five-star beach resorts.) So if a judge criticizes me but the class gets $3M more, I'll take that trade—though one wonders why a judge thinks complaining that class counsel is asking for too much is worse than class counsel actually asking for too much. (Don't cry for class counsel: their $13M award is still more than 3 times their likely exaggerated $4M lodestar for negotiating a settlement where their clients got pennies on the dollar.)

It means CCAF probably shouldn't ask for attorneys' fees, but CCAF's non-profit status and success rate means that it is legally entitled to ask for far more fees than tax law permits it to receive in any given year, so there's no marginal cost to us if we forgo arguing for fees in a particular case. And we'd rather spend time litigating for class members than for our fees.

Some unfortunate dicta in the process: the court held that my client didn't have standing to object to a settlement that explicitly froze out small individual shareholders like herself solely because she didn't take the entirely redundant and futile step of filing a claim form for her $0 recovery. That's just simply incorrect: the objector, as a class member, suffers injury from the waiver the settlement imposes upon her for no compensation, and that injury is redressable if the court rejects the self-dealing by the institutional class representative that favors institutional interests over small-shareholder interests. (Furthermore, there's plainly a problem in claiming that a class action is superior to individual litigation under Fed. R. Civ. Proc. 23(b)(3) if class counsel is going to claim that it's too hard for the aggregated litigation to actually bother to compensate class members.) But do we spend time getting appellate correction of that mistake? Probably cheaper for us to just ask future clients to jump through a pointless hoop in future cases to preempt that argument—though I've also seen class counsel argue "See, the objector likes the settlement because she filed a claim!" And the opportunity cost of pursuing this injustice is not having the time to pursue bigger injustices.

Stockholm Syndrome watch: defense counsel from Simpson Thacher & Bartlett gratuitously supported class counsel's excessive fee request at the fairness hearing. It peeves me when plaintiffs' lawyers look out for lawyers' interests instead of that of their clients, and it peeves me no less when defense counsel do it, too. Unrepresented class members have little choice in the matter, but why a publicly-traded corporation like Pfizer puts up with that is beyond me.

The $3 million fee reduction is the 30th CCAF objection that has met with at least a partially successful result. It also puts CCAF over the quarter-billion-dollar mark in fees knocked out in cases where we objected in our four-year history.

(The Center for Class Action Fairness is not affiliated with the Manhattan Institute.)

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Rafael Mangual
Project Manager,
Legal Policy

Manhattan Institute


Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.