Jander v. International Business Machines Corporation

Background

Larry W. Jander and Richard J. Waksman brought this class action against the Retirement Plans Committee of IBM, Richard Carroll, Martin Schroeter, and Robert Weber. The opinion describes the action as an Employee Retirement Income Security Act (ERISA) class action involving alleged breaches of fiduciary duties related to the IBM Stock Fund. The case had been litigated for more than six years, including motions to dismiss, appeals, and proceedings in the United States Supreme Court.

The parties later participated in mediation and agreed to settle the case. The settlement required the defendants to pay $4,750,000 into a qualified settlement fund. The proposed plan of allocation provided for pro rata distributions to eligible class members based on their net losses under a formula. More than 50,000 class notices were mailed, notices were published, and a settlement website was created. No timely objections or requests to opt out were filed. The court treated one late submission as unrelated to this case and therefore proceeded as though there were no objections.

Settlement Approval

Under Federal Rule of Civil Procedure 23(e), the court reviewed whether the class settlement was fair, adequate, and reasonable. Applying the factors identified by the Second Circuit in City of Detroit v. Grinnell, the court emphasized the complexity, expense, and likely duration of continued litigation; the risks of proving liability and damages; the risks of maintaining the class through trial; and the class’s response to the settlement.

The court noted that the settlement represented approximately 25.8% of the most optimistic estimate of recoverable damages. It found the amount reasonable in light of the risks, including disputes over whether IBM’s stock price had been artificially inflated, what caused the stock-price decline, whether IBM’s accounting treatment was proper, and whether the class could establish damages. The court concluded that the factors supported approval and approved the settlement.

Class Certification and Allocation Plan

The court certified the proposed settlement class under Federal Rule of Civil Procedure 23(b)(1). It found that the class met the requirements of numerosity, commonality, typicality, and adequacy of representation. The court estimated that the class included tens of thousands of members. It found that Jander and Waksman’s claims arose from the same events and legal theories as the other class members’ claims and that their interests were aligned with the class.

The court appointed Jander and Waksman as class representatives and appointed Zamansky LLC as class counsel. It also approved the plan of allocation, finding that its pro rata distribution based on eligible participants’ net losses had a fair and reasonable basis.

Fees, Expenses, and Contribution Awards

Class counsel requested attorneys’ fees equal to 30% of the settlement fund, or $1,425,000, and reimbursement of $90,861.89 in litigation expenses. The court found the requested fee reasonable under the percentage-of-the-fund method. As a cross-check, the court compared the award with counsel’s lodestar—the hours worked multiplied by standard hourly rates—which was $829,662. The resulting multiplier was approximately 1.7, which the court found reasonable.

The court also found that the expenses were of the type normally reimbursed and that no class member objected to them. It approved $10,000 case-contribution awards for each of Jander and Waksman.

Disposition

The motion for final approval of the settlement was granted. The motion for attorneys’ fees, expenses, and case-contribution awards was granted. The proposed settlement and plan of allocation were approved. Class counsel was awarded $1,425,000 in attorneys’ fees and $90,861.89 in litigation expenses, and Jander and Waksman were each authorized to receive $10,000.

The defendants’ unopposed motion for a disbursement from the qualified settlement fund to reimburse IBM for fees associated with an independent fiduciary’s review of the settlement was also granted. The Clerk of Court was directed to terminate all pending motions and mark the case closed.