Oklahoma Firefighters Pension and Retirement System v. International

Background

The Oklahoma Firefighters Pension and Retirement System, acting individually and for the class, brought this securities class action against Lexmark International, Inc., Paul A. Rooke, David Reeder, and Gary Stromquist. The action was filed in 2017. The court had previously resolved a motion to dismiss the amended consolidated complaint. The parties then conducted extensive document discovery, and the lead plaintiff moved for class certification. After mediation, the parties agreed to settle the litigation.

The court preliminarily approved the settlement and authorized notice to the class. The proposed settlement provided for a $12 million cash payment. The lead counsel sought attorneys’ fees equal to 25% of the settlement fund, or $3 million, plus $201,357.78 in litigation expenses and a $2,500 reimbursement to the lead plaintiff. No class members objected to the settlement or opted out.

Settlement Approval

The court applied the standard requiring a class settlement to be fair, adequate, and reasonable, both in the way it was negotiated and in its terms. It found that the settlement resulted from arm’s-length negotiations by experienced counsel after meaningful discovery and under the supervision of a sophisticated institutional investor.

The court also considered the settlement’s risks and benefits. It found that the securities claims would have been complex, expensive, and uncertain to try, particularly because the plaintiffs would have needed expert testimony on falsity, materiality, intent, loss causation, and damages. The plaintiffs also faced risks in proving liability, damages, and maintaining class certification through trial. The court noted that no class member objected or opted out and that substantial litigation had already occurred.

The $12 million settlement represented approximately 10% of the lead plaintiff’s estimated $116.8 million damages, or approximately 38% of a lower potential recovery based on a shorter class period proposed by the defendants. The court concluded that the settlement was reasonable in light of the risks of continued litigation and approved it.

Plan of Allocation and Notice

The court approved the Plan of Allocation because it appeared fair and adequate and was developed by experienced class counsel. The plan was based on the level of alleged artificial inflation in Lexmark’s common-stock price during the class period and apportioned the net settlement fund among authorized claimants based on their claims.

The court also approved the Settlement Notice. More than 32,500 notice packets were mailed to identifiable class members, a summary notice was published in The Wall Street Journal and through PRNewswire, and settlement documents were posted on the settlement website. The notice described the settlement amount, the requested fees and expenses, objection rights, deadlines, and the allocation plan.

Attorneys’ Fees

The court granted in part and denied in part the motion for attorneys’ fees and expenses. Counsel requested 25% of the $12 million settlement fund, or $3 million. The court observed that 25% was within the range of prior awards in the district but was at the higher end.

Counsel reported approximately 4,581 hours of work and a lodestar—a calculation based on reasonable hours multiplied by reasonable hourly rates—of $3,011,766. The requested fee would have produced a lodestar multiplier of 0.996. The court nevertheless found concerns with the billing: partners performed nearly 47% of the billed hours, several partner rates exceeded $1,000 per hour, two exceeded $1,300 per hour, five associate rates exceeded $600 per hour, and counsel billed time for a summer associate.

Applying the relevant fee factors, including the time and labor involved, the complexity and risks of the litigation, the quality of representation, the fee’s relationship to the settlement, and public-policy considerations, the court found that a modest reduction was warranted. It awarded $2.88 million in attorneys’ fees, equal to 24% of the settlement fund. The fees could be disbursed from the court registry account once 75% of the net settlement fund had been distributed.

Expenses and Lead-Plantiff Reimbursement

The court approved $201,357.78 in litigation expenses, finding the request reasonable. More than $126,000 of those expenses related to the plaintiffs’ damages expert. The court also approved the lead plaintiff’s $2,500 reimbursement request as reasonable under the federal securities laws.

Disposition

The motion for final approval of the settlement was granted. The motion for attorneys’ fees and expenses was granted in part and denied in part. The settlement, Plan of Allocation, and Settlement Notice were approved; counsel received $2.88 million in fees and $201,357.78 in expenses; the lead plaintiff received $2,500; pending motions were terminated; and the case was marked closed.