In re GSE Bonds Antitrust Litigation

Background

Between October 2019 and February 2020, the court preliminarily approved five settlements between the plaintiffs and defendants:

- a settlement with Deutsche Bank Securities, Inc.; - a settlement with First Tennessee Bank, N.A., and FTN Financial Securities Corp.; - a settlement with Goldman Sachs; - a settlement with Barclays Capital, Inc.; and - a global settlement with all remaining defendants.

The parties sought final approval of those settlements. Co-lead counsel, Scott+Scott Attorneys at Law LLP and Lowey Dannenberg, P.C., sought attorneys’ fees and reimbursement of litigation expenses. Named plaintiffs City of Birmingham Retirement and Relief System, Electrical Workers Pension System Local 103, I.B.E.W. and Local 103, I.B.E.W. Health Benefit Plan, and Joseph Torsella in his official capacity as Treasurer of the Commonwealth of Pennsylvania sought service awards for their work as class representatives.

Final Approval of the Settlements

Under Federal Rule of Civil Procedure 23(e)(2), a court may finally approve a class settlement only if it finds that the settlement is fair, reasonable, and adequate. The court relied on its earlier analysis of the required factors and considered developments since preliminary approval.

The court found that the requested attorneys’ fee had decreased from the amounts previously estimated. It also found that First Tennessee had provided the cooperation promised when its settlement received preliminary approval. That cooperation added value to the settlement and addressed the court’s earlier concern that the First Tennessee settlement provided a relatively small percentage of the potential recovery.

The class response also favored approval. In the first notice wave, 25 class members requested exclusion, representing 0.38% of the total eligible trading volume. In the second wave, 16 class members requested exclusion, representing 0.1% of the eligible volume. No formal objection remained because one initial objector withdrew the objection after speaking with co-lead counsel. The court also concluded that informal concerns about the notice and claim forms did not weigh against approval.

The court found that the notice plan was the best notice practicable under the circumstances and satisfied due process. It also continued its prior conclusion that the requirements for certifying the settlement class were met. The court therefore granted final approval to all five settlements and certified the class for purposes of entering judgment.

Attorneys’ Fees and Litigation Expenses

Co-lead counsel requested fees equal to 20% of the $386.5 million common settlement fund, or $77.3 million. Applying the factors used to evaluate class-action fee requests, the court found that five factors favored approval and one weighed only slightly against it. The litigation involved alleged collusion in the GSE Bond market over more than seven years, thousands of bond issuances, and sixteen defendants. The court also considered the risks of proving liability and damages, obtaining class certification, and litigating against defendants with substantial resources.

Using a percentage-of-recovery method and checking the result against the lawyers’ hours and rates, the court found the fee reasonable. Counsel had recorded 30,281.14 hours, with billing rates ranging from $350 to $1,150 per hour. The requested fee represented a 4.09 multiplier of the calculated lodestar, meaning the fee was 4.09 times the hours multiplied by the applicable billing rates. The court approved the $77.3 million fee.

The court also awarded the requested reimbursement of $1,718,773.04 in litigation expenses, plus interest on the fee and expense award at the same rate earned by the settlement fund. The court found that the expenses, including expert work, travel, meals, copying, online research, filing and service fees, and telephone charges, were reasonable.

Service Awards

The class representatives requested $400,000 in total service awards: $300,000 for Pennsylvania Treasury and $50,000 each for Birmingham and I.B.E.W. The court found that the representatives had accepted risks associated with participating in the litigation, spent substantial time reviewing filings and discovery materials, helped develop litigation strategy, participated in settlement negotiations, and contributed value to the case.

The court also found that Pennsylvania Treasury’s award was justified. It included $178,000 in fees paid to Hangley Aronchick Segal Pudlin & Schiller for independent advice, which the court determined was reasonable and not duplicative of co-lead counsel’s work. The court additionally found that Pennsylvania Treasury had actively supervised the litigation and would continue monitoring compliance measures for two years. The court approved all requested service awards.

Disposition

The court granted the motions for final approval of the five settlements, attorneys’ fees and expenses, and service awards. The order stated that judgments and additional orders would be docketed to carry out that conclusion. The order approved the settlements rather than deciding the underlying antitrust liability claims.