In re Initial Public Offering Securities Litigation 671 F. Supp. 2d 467

671 F. Supp. 2d 467

In re INITIAL PUBLIC OFFERING SECURITIES LITIGATION.

Master File No. 21 MC 92.

United States District Court, S.D. New York.

Oct. 5, 2009.

*469Stanley D. Bernstein, Esq., Rebecca M. Katz, Esq., Christian Siebott, Esq., Bernstein Liebhard LLP, Robert A. Wallner, Esq., Ariana J. Tadler, Esq., Peter G.A. Safirstein, Esq., Neil Fraser, Esq., Mil-berg LLP, Jules Brody, Esq., Stull, Stull *470& Brody LLP, Howard B. Sirota, Esq., Sirota & Sirota LLP, Fred Taylor Isquith, Esq., Thomas H. Burt, Esq., Wolf Haldenstein Adler Freeman & Herz LLP, New York, NY, David Kessler, Esq., Barroway Topaz Kessler Meltzer & Check LLP, Radnor, PA, for Plaintiffs’ Executive Committee.

Gandolfo V. DiBlasi, Esq., Penny Shane, Esq., David M.J. Rein, Esq., Richard J.L. Lamuscio, Esq., Sullivan and Cromwell LLP, New York, NY, Liaison Counsel for Underwriter Defendants.

Jack C. Auspitz, Esq., Joel C. Haims, Esq., Hilary M. Williams, Esq., Angela T. Relia, Esq., Reema S. Abdelhamid, Esq., Morrison and Foerster LLP, New York, NY, Liaison Counsel for Issuer Defendants.

OPINION AND ORDER

SHIRAA. SCHEINDLIN, United States District Judge:

I. INTRODUCTION

This consolidated action comprises hundreds of securities class actions brought against issuers and underwriters of technology stocks that had their initial public offerings (“IPOs”) during the late 1990s. On April 2, 2009, the parties filed a Stipulation and Agreement of Settlement (“Stipulation”) that seeks to conclude eight years of litigation in all 309 coordinated class actions. Following the Court’s preliminary approval of the proposed settlement, plaintiffs now move for an Order of Final Approval of the Settlement, Plan of Allocation, and Class Certification. The Plaintiffs’ Executive Committee (the “Committee”) moves the Court to grant Attorneys’ Fees and Reimbursement of Expenses and Private Securities Litigation Reform Act (“PSLRA”) Awards to the Lead Plaintiffs and Class Representatives of the 309 settled actions. For the reasons stated below, plaintiffs’ motion for an Order of Final Approval of the Settlement, Plan of Allocation, and Class Certification is granted. The Committee’s motion for the Award of Attorneys’ Fees and Expenses and PSLRA Awards is granted, but not for the amounts requested.

II. BACKGROUND

A. Plaintiffs’ Allegations

Plaintiffs’ allegations are discussed at length in a series of earlier Opinions.1 In brief, plaintiffs allege that the underwriters of hundreds of IPOs required allocants in those IPOs to purchase shares in the aftermarket, often at inflated prices, and to pay the underwriters undisclosed compensation.2 Additionally, the underwriters allegedly prepared analyst reports that contained inaccurate information and recommendations.3 Plaintiffs allege that the issuers participated in or were at least aware of this misconduct and benefitted financially by large run-ups in the prices of their stock.4 Finally, plaintiffs allege that they lost billions of dollars as a result of these manipulations and the fraudulent statements made to cover up the scheme. Plaintiffs have brought claims under both the Securities Act of 1933 (the “Securities Act”) and the Securities Exchange Act of 1934 (the “Exchange Act”).

B. Settlement Terms

In April 2009, the parties entered into a global settlement of the 309 cases, which is *471subject to this Court’s approval.5 The Stipulation provides that defendants will pay a total of $586 million (“Settlement Amount”) in exchange for plaintiffs releasing all Settled Claims against them.6 The Stipulation further provides that the Settlement Amount less any advances will be deposited into an escrow account at least fourteen days before the date of the fairness hearing.7 The parties have stipulated that final approval of the settlement in all of the actions is required.8

C. Class Certification

On October 13, 2004,1 issued an Opinion and Order certifying classes in each of six focus cases.9 The classes consisted of “all persons and entities that purchased or otherwise acquired the securities of [the issuer] during the Class Period and were damaged thereby, subject to various exclusions.” 10 The Class Periods for the Exchange Act claims were the periods from the respective IPOs through December 6, 2000. For the Securities Act Claims, the Class Periods were limited to periods in which all tradeable shares in the market could be traced to the IPOs.11

In June 2005, the Second Circuit granted defendants’ petition for leave to appeal pursuant to Rule 23© of the Federal Rules of Civil Procedure. The Circuit directed the parties to address the proper standard for a class certification motion and whether the Basic v. Levinson presumption of reliance was appropriately extended to plaintiffs’ claims.12

On December 5, 2006, the Second Circuit announced its Opinion in Miles v. Merrill Lynch & Co. (“Miles I”).13 In Miles I, the Circuit revised the standard to be applied in class certification actions and then applied that new standard to this case.14

The court also concluded that plaintiffs “cannot satisfy the predominance requirement for a(b)(3) class action” because individual questions predominated over common questions in the areas of knowledge and reliance.15 First, the court held that plaintiffs could not take advantage of the Basic presumption of reliance.16 The *472court noted that “the market for IPO shares is not efficient,” citing the fact that no analyst reports are published during the 25-day “quiet period.”17 Second, the court ruled that many potential claimants would have known that the price was “affected by the alleged manipulation,” thereby making it difficult for plaintiffs to prove that they were ignorant of inflated prices, a prerequisite of a section 10(b) claim.18 The court noted that the classes as defined included initial IPO allocants, who were “required to purchase in the aftermarket” and who were “fully aware of the obligation that is alleged to have artificially inflated share prices.”19 It also noted plaintiffs’ admission that there was an “industry-wide understanding” of aftermarket purchases, evidenced by the knowledge of the many thousands of people employed by the institutional investors who had been parties to the tie-in agreements and by news reports arid a Securities Exchange Commission (“SEC”) Staff Legal Bulletin that had publicized such practices in 1999 and 2000.20

This appeared to close the door on any opportunity for class certification in these cases. However, on April 6, 2007, the Miles panel issued a decision denying rehearing of Miles I but clarifying certain points in its original opinion (“Miles II”).21 Plaintiffs had argued in their petition for rehearing that the Circuit had erred both in finding that predominance could not be satisfied and in failing to remand to this Court for evaluation of the class under the clarified standard.22 Specifically, plaintiffs argued that non-allocants who purchased shares in the aftermarket “would have relied on the market price of the shares and would have lacked knowledge of the alleged fraud....”23

The Circuit explained that its decision in Miles I applied only to the broad class certified by this Court.24 Thus, the Circuit resolved both of plaintiffs’ arguments by observing that “[n]othing in [Miles I] precludes the Petitioners from returning to the District Court to seek certification of a more modest class, one as to which the Rule 23 criteria might be met, according to the standards we have outlined.”25 The Circuit concluded, “we leave it to the Petitioners in the first instance to seek whatever relief they deem appropriate from the District Court, which can be expected to give such a request full and fair consideration.” 26

According to the Stipulation, the parties have agreed to class certification in each of the 309 cases pursuant to Rule 23(a) and Rule 23(b)(3):

[A]ll Persons who purchased or otherwise acquired any of the Subject Securities at issue in such case during the Settlement Class Period applicable to such action and were damaged thereby.
(a) Subject to the review provisions provided in Paragraph 20 [of the Stipulation],27 excluded from the Settlement Class is each Person, other than a Natu*473ral Person, that was identified as a recipient of an allocation of shares from the “institutional pot” in the IPO or Other Charged Offering of any of the 309 Subject Securities, according to a list derived from the final “institutional pot” list created at the time of each IPO or Other Charged Offering by the lead Underwriter in that Offering (“Excluded Allocants”).
(b) Also excluded from the Settlement Classes are (i) each Person that currently is or previously was a named defendant in any of the 309 Actions (hereafter “Named Defendant”), (ii) any attorney who has appeared in the Actions on behalf of a Named Defendant, (iii) members of the immediate family of any Named Defendant, (iv) any entity in which any Excluded Allocant or Named Defendant has or during any of the class periods had a majority interest, (v) the legal representatives, heirs, successors or assigns of any Excluded Allocant or Named Defendant; and (vi) any director, officer, employee, or beneficial owner of any Excluded Allocant or Named Defendant during any of the Settlement Class Periods. Notwithstanding the prior sentence, a person shall not be excluded from the Settlement Classes merely by virtue of his, her or its beneficial ownership of the securities of a publicly-traded Excluded Allocant or Named Defendant.28

In each settled action, the Class Period is from the date of the IPO until December 6, 2000.29

In a June 10, 2009 Opinion and Order (“June Opinion and Order”), I certified the settlement classes in this case after reconsidering the Rule 23(a) and (b) factors in light of the Circuit’s new standards.30 I held that plaintiffs had demonstrated by the preponderance of the evidence that reliance and loss causation could be proven on a class-wide basis.31 I also ruled that “when the classes are properly circumscribed and institutional allocants are excluded, individual questions of knowledge will not predominate over common ones.”32 Finally, the class no longer excludes those retail investors who may have “paid any undisclosed compensation to the allocating underwriter(s),” which the Second Circuit found problematic in Miles J.33 Instead, the settlement classes exclude all institutional investors who were also initial allocants whether or not they may have paid improper and undisclosed compensation to the underwriter defendants, therefore resolving the ascertainability problems in the 2004 class certification motion.34

D. Fees and Expenses

The Committee35 requests that the Court award attorneys’ fees of one-third of *474the Total Designation Amount in each Action and expenses of approximately fifty million dollars in connection with the prosecution of the Actions.36 In support of its fee motion, the Committee has submitted summary time sheets demonstrating that the attorneys of the firms comprising the Committee have collectively spent 677,000 hours for a lodestar of $276 million.37 It also notes that it has advanced approximately forty-three million dollars in expenses.38 The fifty-plus other plaintiffs’ firms that were involved in this litigation have reported spending over 350,000 hours, for over one hundred million dollars in lodestar and approximately $7.5 million in expenses.39

The Committee also supports the payment of “reasonable” class representative awards for lead plaintiffs, proposed class representatives, and/or proposed settlement class representatives.40 It has submitted the declarations of over four hundred lead plaintiffs and class representatives attesting to the hours spent and hourly wages lost performing work for this litigation.41 The Committee requests that the Court grant an aggregate award to lead plaintiffs and class representatives not to exceed four million dollars.42

*475E. Plan of Designation and Allocation

According to the Stipulation, the Settlement Amount is to be distributed to all Authorized Claimants in accordance with the Plan of Allocation, and none shall revert to defendants under any circumstances.43 The Stipulation further provides that the Plan of Allocation is “not a necessary term of the Stipulation” and is “not a condition of this Stipulation or the Settlement that any particular Plan of Allocation be approved.”44

The proposed Plan of Allocation (the “Plan”) is set forth in the Notice of Pendency. According to the Plan, the $586 million Settlement Amount and interest earned will be reduced by taxes, costs, fees, and expenses to produce a “Net Settlement Fund.”45 This Net Settlement Fund will then be allocated to the Actions in proportion to the amount of potentially recoverable damages in accordance with a table of amounts as set forth in Schedule 2 of the Notice of Pendency (“Net Designation Amounts”).46 For those cases in which the applied damage methodology resulted in a Net Designation Amount of less than $300,000 for a particular action, it is proposed that such case would be allotted a “floor” or minimum Net Designation Amount of $300,000.47 This floor applies only in thirty-five eases, “resulting in total additional designations (to those cases) of $3,925,139, over and above the designation amounts resulting from the damage methodology.”48 The highest Net Designation Amount in the 309 cases is approximately twenty million dollars.49

Authorized Claimants will be eligible to receive a pro rata share of the Net Settlement Fund designated for the case or cases for which they have a claim up to the amount of their recognized losses (“Recognized Claim”).50 Where the Net Designation Amount for a particular case exceeds the actual amount of the recognized losses of all Authorized Claimants, the excess will “flow into a pot to be combined with excess Net Designation Amounts from all other Actions ... and will be utilized to pay underfunded Recognized Claims in all Actions.” 51 Finally, once all Recognized Claims are paid, any excess funds will be pooled and distributed to all Authorized Claimants in proportion to each Authorized Claimant’s “Unpaid Market Loss.”52 The Unpaid Market Loss is calculated by subtracting the Recognized Claim from the Overall Market Loss — equal to the purchase price paid (“PPP”) minus the sales proceeds received from a Subject Security (“SPR”) or the PPP minus the holding price per Subject Security (“HPS”).53 The HPS values are calculated using the closing price of the Subject Security as of December 6, 2000.54

Recognized Claims will be calculated according to the following formula: For Subject Securities purchased during the Class Period but sold prior to December 6, 2000, *476the Recognized Claim is the lesser of (a) the alleged inflation in the price of the security (“IPS”) at the date of purchase minus the IPS at the date of sale, multiplied by the number of securities purchased and sold, or (b) the PPP minus the SPR, multiplied by the number of securities purchased and sold.55 For those Subject Securities purchased during the Class Period and held as of December 6, 2000, the Recognized Claim will be calculated as the IPS on the date of purchase multiplied by the number of securities purchased during the Class Period.56 For those Authorized Claimants who have purchased and sold a Subject Security more than once during the Class Period, their Recognized Claim will be determined on a Last In First Out or “LIFO” basis.57 Finally, each Authorized Claimant is entitled to a minimum distribution amount of ten dollars no matter the size of his, her, or its Recognized Claim.58

F. Class Representative Approvals

Plaintiffs inform the Court that in each of the 309 cases, at least one of the proposed settlement class representatives affirmatively approved the settlement.59 However, they also report that in five cases, the lead plaintiff disapproved of the settlement.60 Nevertheless, they note that none of these lead plaintiffs objected to the settlement or requested exclusion.61 In addition, they inform the Court that in each of these five eases, a class member who desires to serve as settlement class representative has approved the settlement.62

G. Notice

Following this Court’s preliminary approval of the settlement, The Garden City Group (“GCG”) — Claims Administrator for these actions — mailed more than seven million copies of the Notice of Pendency to potential class members.63 The Summary Notice was also published in three national newspapers — The Wall Street Journal, The New York Times, and USA Today— and as a press release over the PR Newswire.64

Each of the seven million potential class members received a Summary “Frontispiece” that identifies the Subject Security purchased by the class member and summarizes the settlement terms, the Notice of Pendency (the “Notice”), and a Proof of Claim form and instructions for completing the form.65 Pursuant to the PSLRA, the Notice and attached schedules include the following information: (1) a Statement of Plaintiff Recovery, detailing the aggregate recovery and the recovery on an average per-share basis; (2) a Statement of Potential Outcome of the Case, explaining the *477litigation positions of both plaintiffs and defendants at the time of settlement; (3) a Statement of Attorneys’ Fees and Costs Sought and Request for PSLRA Awards Reimbursing Reasonable Time and Expense for Representative Plaintiffs, stating the intention of plaintiffs’ counsel to seek fees not to exceed one-third of the gross settlement and lead plaintiffs and class representatives awards not to exceed four million dollars and providing the fees and costs on a per-share basis; (4) contact information for members of the Plaintiffs’ Executive Committee; and (5) a Statement of the Reason for the Settlement, noting the creation of a $586 million settlement fund for class members.66

Pursuant to Federal Rule of Civil Procedure 23(c)(2), the Notice also provides information about the litigation, including a description of plaintiffs’ claims and the defenses put forth by defendants.67 It sets forth the class definition and the settlement benefits.68 It further provides instructions for submitting a proof of claim, requesting exclusion, and objecting to the settlement.69 The Notice also informs class members of their ability to hire separate counsel to represent them in this litigation.70 The Notice informs class members of the date of the fairness hearing, the consequences of failing to act, and how a class member can obtain more information.71 Finally, it includes details of the Plan of Allocation and a message to securities brokers and other nominees informing them of the Court’s Order to submit the names and last known addresses of any entity or person for which they purchased securities during the class period within twenty days of receiving the Notice.72

GCG maintains a website at wwwipo securitieslitigation.com (“IPO website”), which includes information regarding the litigation, explains the proposed settlement, and allows class members to submit proofs of claim.73 GCG also maintains a 24-hour toll-free hotline and an email address to assist class members with their questions.74 As of August 25, 2009, GCG had received 371 requests for exclusion and 85,848 Proofs of Claim.75 As of the date of the fairness hearing, GCG had received over 100,000 Proofs of Claim.76 Although the deadline to request exclusion has passed, class members will have until December 10, 2009 to submit Proofs of Claim.77

H. Fairness Hearing

A fairness hearing was held on September 10, 2009. Six objectors spoke at the hearing, and they presented a wide range *478of concerns, including objections with respect to the class definition, the Notice, the requested attorneys’ fees and expenses, and the requested PSLRA awards.78 The Committee was given the opportunity to respond to all objections.79

III. APPLICABLE LAW

A. Final Approval

Unlike settlements in ordinary suits, the settlement of a class action must by approved by the court.80 The court owes a duty to class members to ensure that the proposed settlement is “fair, reasonable and adequate.”81 In making this determination, the court’s “primary concern is with the substantive terms of the settlement;” accordingly, the court must “compare the terms of the compromise with the likely rewards of litigation.”82 The trial judge must “ ‘apprise! ] himself of all facts necessary for an intelligent and objective opinion of the probabilities of ultimate success should the claim be litigated.’ ”83 The court should not go so far as to effectively conduct a trial on the merit s, but should make “findings of fact and conclusions of law whenever the propriety of the settlement is seriously in dispute.”84 The court must also scrutinize the negotiating process leading up to the settlement. “A presumption of fairness, adequacy, and reasonableness may attach to a class settlement reached in arm’s-length negotiations between experienced, capable counsel after meaningful discovery.” 85

In determining whether a settlement is “fair, reasonable and adequate,” courts in this Circuit look to the following factors: (1) the complexity, expense and likely duration of the litigation; (2) the reaction of the class to the settlement; (3) the stage of the proceedings and the amount of discovery completed; (4) the risks of establishing liability; (5) the risks of establishing damages; (6) the risks of maintaining the class through the trial; (7) the ability of the defendants to withstand a greater judgment; (8) the range of reasonableness of the settlement fund in light of the best possible recovery; and (9) the range of reasonableness of the settlement fund to a possible recovery in light of all the attendant risks of litigation (collectively, the “Grinnell factors”).86 Ultimately, the approval of the proposed settlement of a class action is a matter of discretion for the trial court.87 Nevertheless, a court should be mindful of the “ ‘strong judicial *479policy in favor of settlements, particularly in the class action context.’ ”88

B. Plan of Allocation

“ ‘To warrant approval, the plan of allocation must meet the standards by which the ... settlement was scrutinized— namely, it must be fair and adequate.’ ”89 “An allocation formula need only have a reasonable, rational basis, particularly if recommended by experienced and competent class counsel.”90 Nevertheless, “where a proposed settlement provides favorable treatment to some segment of the class, careful judicial scrutiny is required to prevent injustice and to ensure that the burden of settlement is not shifted arbitrarily to a small group of class members.” 91

C. PSLRA Awards

Section 27(a)(4) of the PSLRA states:

The share of any final judgment or of any settlement that is awarded to a representative party serving on behalf of a class shall be equal, on a per share basis, to the portion of the final judgment or settlement awarded to all other members of the class. Nothing in this paragraph shall be construed to limit the award of reasonable costs and expenses (including lost wages) directly relating to the representation of the class to any representative party serving on behalf of a class.92

D.Attorneys’ Fees

Federal Rule of Civil Procedure 23(h) provides: “In a certified class action, a court may award reasonable attorney’s fees and nontaxable costs that are authorized by law or by the parties’ agreement.” “‘[A] party that secured a fund for the benefit of others, in addition to himself, may recover his costs, including his attorney’s fees, from the fund itself or directly from the other parties enjoying the benefit.’ ”93 “This principle is known as the common fund doctrine.”94 “ ‘The doctrine rests on the perception that persons who obtain the benefit of a lawsuit without contributing to its cost are unjustly enriched at the successful litigant’s expense.’ ”95

Courts may award attorneys’ fees in common fund cases under either the “lodestar” method or the “percentage of the fund” method.96 “The lodestar method *480multiplies hours reasonably expended against a reasonable hourly rate. Courts in their discretion may increase the lodestar by applying a multiplier based on factors such as the riskiness of the litigation and the quality of the attorneys.”97 “The trend in this Circuit is toward the percentage method, [ ] which directly aligns the interests of the class and its counsel and provides a powerful incentive for the efficient prosecution and early resolution of litigation.... In contrast, the lodestar creates an unanticipated disincentive to early settlements, tempts lawyers to run up their hours, and compels district courts to engage in a gimlet-eyed review of line-item fee audits.”98 Nevertheless, “the lodestar remains useful as a baseline even if the percentage method is eventually chosen.” 99

“Irrespective of which method is used, the ‘Goldberger factors’ ultimately determine the reasonableness of a common fund fee. They include: (1) the time and labor expended by counsel; (2) the magnitude and complexities of the litigation; (3) the risk of the litigation ...; (4) the quality of representation; (5) the requested fee in relation to the settlement; and (6) public policy considerations.”100 Finally, “[r]ecognizing that economies of scale could cause windfalls in common fund cases, courts have traditionally awarded fees for common fund cases in the lower range of what is reasonable.”101

IV. DISCUSSION

A. Final Approval

1. Settlement Discussions

The Court requested and the parties provided affidavits from retired Judges Nicholas Politan and Daniel Weinstein, the two mediators that assisted the parties to come to the terms of the instant settlement.102 Judges Politan and Weinstein have both attested that the settlement “was fully negotiated, was the best that the settlement classes could obtain, and is fair, adequate and reasonable to the members of the classes.”103 They inform the Court that negotiations spanned nine months, included seven full mediation sessions, and countless phone conferences and other meetings with individual parties.104 In addition, they confirm that the terms were the product of arms’ length bargaining.105 They note specifically that “[c]ounsel on all sides were well-prepared, ex*481tremely knowledgeable about the facts and the law, and advocated vigorously for their client.”106 Thus, a presumption of fairness, adequacy, and reasonableness attaches to this settlement.

2. The Grinnell Factors

Courts in this Circuit look to the nine Grinnell factors to determine whether a settlement is “fair, reasonable and adequate” in accordance with Rule 23(e). Although I have already evaluated eight of the nine factors in the June Opinion and Order,107 I nevertheless consider each of the factors or group of factors again,

a. The Complexity, Expense and Likely Duration of the Litigation

It has been eight years since thousands of investors brought the class action lawsuits that are the subject of this consolidated action.108 These actions alleged that fifty-five underwriters, more than three hundred issuers, and hundreds of individuals associated with these issuers defrauded the public.109 On August 9, 2001, the Chief Judge of the United States District Court for the Southern District of New York entered an Order transferring each of these cases to this Court’s docket for pretrial coordination.110 In an Order dated August 12, 2003, a similar action in Florida was transferred to this Court for pre-trial supervision.111 Ultimately, all of these cases would have been re-assigned to judges in this district had the actions gone to trial. In addition, plaintiffs note that “a vast amount of additional factual and expert discovery remains to prepare for trials, and motions would be filed raising every possible kind of pre-trial, trial and post-trial issue conceivable.”112 This Court has already issued twenty-nine Opinions in this case. The Court of Appeals has issued three. No one disputes that adjudication of these actions would have been a daunting task, and the expense and effort involved would certainly have been burdensome to the parties and the Court. This factor therefore weighs heavily in favor of final approval,

b. Stage of Proceedings and Amount of Discovery Completed

This factor is aimed at ensuring that the parties have a “thorough understanding of their case” prior to settlement.113 Litigation in this case has been ongoing for eight years. The Court has decided multiple motions to dismiss, considered numerous motions for class certification, and the parties have submitted more than a dozen expert reports, taken more than a hundred depositions, and reviewed tens of millions of pages in discovery.114 In addition, *482plaintiffs have informed the Court that they are “proposing this settlement with eyes open.”115 I find that this factor weighs in favor of final approval,

c. Risks of Class Prevailing (Establishing Liability, Damages, and Maintaining the Class Through Trial)

Plaintiffs concede that “establishing liability is, at best, uncertain.”116 They contend that defendants have denied any wrongdoing in the case, arguing that the tie-in agreements were really “underwriters gauging ‘indications of interest’ as part of the IPO price discovery process.”117 Plaintiffs admit that it is possible that a jury might find defendants’ version of events to be more compelling, reducing their recovery to nothing.118 Plaintiffs also acknowledge that if history is any indication, their chances of success at trial is — at best — fifty percent.119

Even more complicated is the issue of loss causation and damages. Plaintiffs’ expert, Daniel R. Fischel, has proposed a method of proving that the alleged scheme inflated stock prices as early as the beginning of trading and that this inflation dissipated throughout the class period.120 Defendants have challenged this proposed methodology during previous motions for class certification, submitting reports from a number of other experts in the field.121 There is a likelihood that defendants’ theories might be credited by the jury, thereby limiting the amount of recovery plaintiffs would receive.122

Finally, the maintenance of class certification in these cases through trial is fraught with risks. Plaintiffs inform the Court that defendants have compromised on several issues that defendants had previously argued would make these class actions unmanageable if they went to trial.123 In addition, decertification is always a likely possibility during trial in complex class actions such as these. These factors therefore weigh in favor of final approval,

d. Ability of Defendants to Withstand a Greater Judgment

Although plaintiffs previously argued- — and this Court agreed — that the economic climate and the insolvency of many of the defendants made it imperative “ ‘to take the bird in hand instead of a prospective flock in the bush,’ ”124 they now retreat from this argument. In its final approval motion, plaintiffs state that they “do not contend that defendants could not collectively withstand a greater judgment.”125 Indeed, the economy shows signs of recovery, and a number of the underwriter defendants no longer appear to be faltering. While “ ‘[t]he fact that a defendant is able to pay more than it offers in settlement does not, standing alone, indicate the settlement is unreasonable or inade*483quate,’ ”126 this factor weighs against final approval.

e. Range of Reasonableness of Settlement Fund in Light of Best Possible Recovery and Attendant Risks of Litigation

The Second Circuit has held that a settlement that is within a range “ ‘that recognizes the uncertainties of law and fact in any particular case and the concomitant risks and costs necessarily inherent in taking any litigation to completion,’ ” will not be reversed on appeal.127 The Settlement Amount has been one of the most scrutinized parts of the Stipulation.128 The $586 million settlement represents two percent of the aggregate expected recovery in the 309 actions129 and is less than the one billion dollar guarantee provided by the Issuer defendants that the Court previously preliminarily approved in 2005.130 However, a few points are worth noting.

First, and most importantly, it cannot be disputed that the Second Circuit’s decision in Miles I changed the negotiating positions of plaintiffs and defendants dramatically. Although the Circuit subsequently revived the litigation in Miles II — opining that nothing in Miles I bars plaintiffs from returning to this Court with a more modest class definition — its ruling in Miles I effectively prevented institutional investors who were initial allocants in the IPOs from participating in any class. The exclusion of these institutional investors is largely the reason why the expected recovery in this litigation has decreased from fifty-five billion dollars to thirty-two billion dollars. Plaintiffs cannot expect to receive the same aggregate recovery after Miles I.

Second, although a number of objectors noted that the settlement was minuscule compared to the expected recovery in the *484case, the Second Circuit has held that a settlement amount of even a fraction of the potential recovery does not render a proposed settlement inadequate.131 And while the proposed settlement is being compared — -justifiably or not — to the expected recovery amount as calculated by plaintiffs’ damages expert, plaintiffs note that the expected recovery is based largely on assumptions, “any of which, if wrong, could doom any recovery at all or certainly drastically reduce any recovery even if successful at trial.”132

Finally, although the billion dollar guarantee provided by the Issuer defendants in 2005 was larger than the current proposed settlement, it was negotiated prior to the Second Circuit’s decision in Miles I. As noted above, the class size was restricted and the expected recovery severely limited following that decision. It is therefore inappropriate to compare the proposed settlement to the 2005 settlement.

Nevertheless, as I noted in my June Opinion and Order, the 2005 settlement is distinguishable because it was merely a guarantee. None of the proceeds were to be distributed to putative class members until “after the conclusion of all of the above-mentioned proceedings with respect to the Underwriters.”133 In addition, the guarantee required plaintiffs to continue to litigate their claims against the Underwriters.134 Forcing plaintiffs to litigate the matter until verdict (and potentially through an appeal) would have been not only costly but uncertain. In the end, plaintiffs could have lost against the underwriters after expending significant additional costs.135

And while the Settlement Amount is less than the billion dollar guarantee in absolute terms, the class definition has been significantly narrowed. All institutional investors who received IPO allocations from the “institutional pots” are now excluded from recovery, thereby severely limiting the number of potential claimants. Plaintiffs estimate that “there are roughly 7,000 unique entities (other than natural persons) that received allocations from the institutional pot list” and that they and their employees and defendants’ employees are now excluded from the settlement class.136 As a result, although the “pie” is smaller, each Authorized Claimant should *485receive a larger slice.137 I therefore find that the settlement is reasonable in light of the expected recovery and attendant risks.

f. Reaction of the Class to Settlement

The final Grinnell factor that I must consider is the reaction of the class to the settlement. “ ‘If only a small number of objections are received, that fact can be viewed as indicative of the adequacy of the settlement.’ ”138 The Second Circuit has also previously provided guidance as to what percentage of the class must object before a settlement would be rendered unfair, indicating that an otherwise fair settlement should not be deemed unfair because of opposition by thirty-six percent of the total class.139 As noted, over seven million notices were sent to potential class members, and the Committee informed the Court at the Fairness Hearing that GCG has received over 100,000 Proofs of Claim as of that date. GCG reports that as of August 25, 2009, it has received 371 requests for exclusion. As of the date of this Opinion, the Court has received objections from approximately 140 class members — less than a hundredth of one percent. Nevertheless, because many of the objectors have raised valid concerns, I will discuss and respond to each of them.140

i. Notice Was Inadequate

Some class members opined that the Notice was inadequate and incomplete. For instance, Douglas Parker contends that the Notice fails to: (1) give details of the 2005 proposed settlement so that class members can compare that settlement with the current settlement; (2) set forth the aggregate amount of estimated damages or the contributions of the underwriters to the settlement; (3) provide evidence that the defendants are unable to withstand a greater settlement; (4) disclose the reasons why five of the lead plaintiffs declined to approve the settlement; and (5) disclose any information substantiating plaintiffs’ counsel’s request for fees and expenses.141 At the fairness hearing, a number of objectors opined that the Notice was inadequate because it failed to provide information substantiating the Committee’s request for PSLRA lead plaintiff and class representative awards not to exceed an aggregate of four million dollars.142 Objectors argued that class members need to know how much is being awarded to these class representatives before they decide whether to participate in the settlement.143

As an initial matter, neither the PSLRA nor Rule 23 requires greater disclosure than the contents of the Notice of Pen*486dency that was disseminated in these actions.144 And although the PSLRA provides that a court may direct notice of additional information to class members, I noted at the fairness hearing that providing too much information may also pose significant problems — doing so may confuse class members and make it impossible for them to locate the information in which they are most interested.145 Nevertheless, I will discuss each of the above objections in turn.

The 2005 Settlement

Although I predicted that class members might compare the current settlement to the 2005 settlement and therefore distinguished the two settlements in my June Opinion and Order and again in this Opinion, that settlement should not be a relevant factor in a class member’s consideration of the current offer. The 2005 settlement was offered by the Issuer defendants prior to the Second Circuit’s decisions in Miles I and Miles II and was derailed by those opinions. In any case, the settlements are easily distinguishable because the 2005 settlement was not only based on a larger expected recovery, but provided only a guarantee of recovery some time in the future.

Aggregate Amount of Estimated Damages

Although the Notice does not include the aggregate amount of estimated damages for all 309 actions, it includes the estimated recovery for each of the actions, which is all that is required under the PSLRA.146 A class member need only add all of the individual damages figures to obtain an aggregate figure. And while the Notice did not specify how much of the settlement is being paid by the underwriters as opposed to the issuers, the Court has since directed plaintiffs’ counsel to disclose on the IPO website the fact that the bulk of the settlement is being paid by the underwriters and “a portion is being paid by the insurance companies for the Issuers.”147 The Court can now disclose that although the Underwriter defendants (and/or their insurers) and the insurers of the Issuer defendants participated in the settlement, no portion of the settlement is being paid by the Issuer defendants themselves. Plaintiffs’ counsel note that they have not been able to identify one case in which notice was deemed inadequate because of a lack of disclosure of the contributions of each defendant to the settlement, and ob*487jectors have cited to none.148

Evidence of Defendants’ Ability to Withstand Greater Judgment

As noted, whether the defendants can withstand a greater judgment is one of the Grinnell factors a court must consider when determining whether to approve a proposed settlement. However, this factor should not be over-emphasized. Just because a defendant is capable of making a larger payment does not mean that the settlement is inadequate. What is required is only a determination that the settlement is fair, reasonable, and adequate. Nevertheless, the Court has already held that this factor weighs against approval of the proposed settlement.

Reasons that Five of the Lead Plaintiffs Did Not Approve the Settlement

Although the refusal of five lead plaintiffs to approve the settlement may appear troubling, the substitution of unnamed class members for named plaintiffs who fall out of a case because of settlement “is a common and normally an unexceptionable [] feature of class action litigation....”149 And the Committee has informed the Court that those reasons cannot be disclosed without a waiver of the attorney-client privilege with respect to communications between plaintiffs’ counsel and those five lead plaintiffs.150 The Committee also notes that none of these five lead plaintiffs have opted out of the class, nor have any of them objected to the settlement.151

Substantiation of Request for Attorneys’ Fees and Expenses

Pursuant to Court order, the Committee posted a short summary of the work it has performed on this litigation on the IPO website.152 Class members were therefore able to evaluate the request for fees in light of the work performed in the litigation prior to the deadline for submission of objections. In addition, the request for attorneys’ fees and expenses has since been filed with the Court and posted on the IPO website, pursuant to Court order.153 An additional period of time has been extended to class members to object to plaintiffs’ counsel’s application.154 The Court has carefully considered these objections and the application in determining the proper and fair amount to award to *488plaintiffs’ counsel.155

Substantiation of Request for PSLRA Awards

Some objectors opined at the fairness hearing that class members could not consider the proposed settlement without information regarding each individual lead plaintiffs or class representative’s request for PSLRA awards.156 As noted at the fairness hearing, however, I am not aware of any settlement in which a court has ruled on fee applications prior to providing notice to the class.157 Moreover, the Notice included plaintiffs’ counsel’s request of awards to lead plaintiffs and class representatives not to exceed four million dollars. For purposes of deciding whether to participate in the settlement, the amount that individual lead plaintiffs or class representatives are requesting is irrelevant. Furthermore, as with the attorneys’ fees, each award request has since been posted on the IPO website for review by class members.158 Any argument that failing to give notice of such information by mail is in contravention of the PSLRA is erroneous. The Notice provides the information required by the PSLRA, including the maximum amount of the award request and the PSLRA Statement of Fees, Expenses and PSLRA Award Requests per damaged share.159

ii. Required Documentation Is Too Burdensome

A number of objectors noted that the documentation required to substantiate *489their claims is unreasonably burdensome considering the small recovery they will receive and the lapse of time since their investments.160 Some objectors question how plaintiffs’ counsel and GCG have been able to locate enough information to identify potential class members but nonetheless cannot find the other information needed to substantiate class members’ claims.161 Plaintiffs’ counsel respond that a “vast majority” of class members were notified during the 2005 settlement that they should retain documentation to support their claims.162

A requirement that potential class members provide documentation is not unusual in securities litigations. This measure is implemented for the purpose of reducing the number of fraudulent claims. Nevertheless, any documentation requirements must be reasonable in light of the time that has passed since many of these securities were traded. The Court had therefore ordered plaintiffs’ counsel and GCG to post a notice on the IPO website, notifying potential class members that they should submit all proofs of claim no matter the lack of appropriate documentation.163 Thus, all potential class members who wish to participate in this settlement but who cannot locate appropriate documentation are nonetheless encouraged to submit their claims documents — GCG and plaintiffs’ counsel are directed to attempt, in good faith, to determine each claim’s eligibility for participation.

iii. Claims Lack Merit

A few objectors contend surprisingly that the claims in this action have no merit. For instance, one class member opined *490that “[t]he lawsuit [is] frivolous. The only sin committed by the 309 companies was that they conducted their IPO[s] just before the bubble burst and the stock market crashed.”164 Two other objectors state, “[w]e believe the claims are without merit and therefore we beg the court to rule against the plaintiffs.”165 Yet another objector contends “[w]ere this case to go to trial, it seems readily apparent that, while expensive, the defense would win and the plaintiffs and their attorneys and representatives would receive absolutely nothing.” 166 Finally, one objector believes that “the case is based too much on plausibility and based insufficiently in reality. The court documents I reviewed indicate that nothing has been proved.”167

Because the parties agreed to settle this litigation in the midst of discovery, the Court has not made any rulings regarding the merits of the actions. Nonetheless, this objection makes no sense — particularly in light of the fact that the Issuer defendants are not contributing to this settlement. That plaintiffs’ counsel were able to negotiate a settlement with defendants over allegedly weak claims indicates that plaintiffs’ counsel have represented their clients well.168

iv. The Objections of Theodore Bechtold

On behalf of thirty-nine objectors, attorney Theodore Bechtold filed a number of letters voicing objections to the proposed settlement.169 Some of the objections have been addressed above, such as the inadequacy of the settlement amount and the inadequacy of the Notice.170 Bechtold argues additionally, however, that (1) the same person cannot serve as lead plaintiff in more than one action, and (2) that this *491Court’s “participation in some related IPOs” exacerbates the concerns about possible conflicts of interest.171

Both of these contentions have been adequately addressed by the Court in previous opinions and rulings. For instance, in 2002, this Court held that it was appropriate for the same person to serve as a lead plaintiff in multiple IPO cases.172 Moreover, I agree with plaintiffs’ counsel’s argument that such challenge has surely been waived when none of Bechtold’s clients have ever questioned the appointment of any of the lead plaintiffs until now or moved to be appointed lead plaintiff or class representative.173 Bechtold’s second objection was also addressed in one of my previous decisions.174 I held there that I had nothing more than a “ ‘remote, contingent, or speculative’ ” interest in the litigation and therefore dismissed any claim that there was a conflict of interest.175

Bechtold also submitted a letter that criticizes the appointment as lead plaintiff in several eases in this litigation of Saul Kassin, who Bechtold claims is the same Saul Kassin that was arrested recently on federal money laundering charges.176 Bechtold argues that Saul Kassin’s involvement in this case “taints [the] involvement of [all of the Kassins] in the IPO Securities Litigation....”177 The Committee has confirmed that the Saul Kassin that is serving as lead plaintiff in several cases is not the same man as the Saul Kassin that was arrested.178 Bechtold’s arguments are therefore rejected.179

v. Conclusion

Having carefully considered and addressed the objections to the proposed settlement, I conclude that the Grinnell factors weigh — on balance — in favor of approving the proposed settlement. I therefore find that the proposed settlement is fair, reasonable, and adequate, and the settlement is hereby approved.

B. Class Certification

In addition to challenging the fairness of the settlement, some of the objectors also criticized the Court’s certification of the settlement classes in these actions. I will address each of these issues in turn.

1. Class Definition

JKM Company contends that the class definition incorrectly includes investors “who were damaged.”180 JKM Company suggests that the class certification should include only those individuals who purchased shares of the Subject Securities during the class period regardless of whether they were damaged.181 It argues *492that inclusion of such a phrase in the class definition “(1) does not provide a precise, objective and presently ascertainable way to identify class members, (2) requires a ‘mini trial’ to determine whether a particular person is in the class, and (3) requires the Court to address the central issue of liability (whether a person has suffered damages).”182

This argument has no merit. Class definitions are important because (1) they identify the individuals who are precluded from bringing suit in the future, in accordance with the Stipulation’s bar provision, and (2) they identify the individuals who may recover pursuant to the Plan of Allocation.

First, an investor who was not damaged by defendants’ alleged misconduct would not otherwise be able to bring a claim based on the same misconduct in a subsequent action. It is therefore of little consequence that the class definition contains the “and were damaged thereby” phrase.183 For purposes of determining who can bring suit in the future, that phrase is simply superfluous because an investor who is not damaged would not have a viable claim.

Second, at the fairness hearing, JKM Company argued further that it could not ascertain easily whether it was a member of the class because the phrase “and were damaged thereby” was not defined.184 But an investor incurs damages on his, her, or its purchase by losing money. A quick look at trading records would show whether JKM Company had lost money on its investments. Thus, the cases to which JKM Company cites are inapposite. Chiang v. Veneman and Williams v. Glickman are discrimination cases.185 In these cases, the Third Circuit and a district court in the District of Columbia rejected class definitions that required a determination as to whether potential class members suffered discrimination.186 Similarly, in *493Kenro, Inc. v. Fax Daily, Inc., the district court refused to certify a class defined as “all persons or entities who have received ... a publication from Fax Daily, Inc---without the prior expressed invitation or permission of such person or entity.”187 In each of these cases, class membership hinged on the courts’ ability to determine whether an individual was discriminated against or whether he or she had invited the advertisements, necessitating individual mini-trials.188 This is not the case here.

Moreover, the Plan of Allocation defines how damages will be determined. Those who believe they have been damaged will submit their proofs of claim, and each claim will be evaluated based upon an objective formula pursuant to the Plan of Allocation. Thus, to the extent that JKM Company is questioning how a determination will be made regarding who has been damaged, its objection is properly directed to the Plan of Allocation, which I discuss later in this Opinion.189

Finally, while this particular issue has never been addressed by the Second Circuit, the Fifth Circuit has affirmed a class definition with the phrase “and were damaged thereby”190 and similar classes have been certified by other courts in this district.191 JKM Company’s objection is therefore unfounded.

2. Class Period

Objector James J. Hayes contends that the class period is too long because any alleged inflation would have dissipated after the first quarterly earnings statement was issued by each issuer, apprising potential class members of the actual value of their investments and uncovering possible manipulation.192 However, whether the first earnings report of any of the issuers would have informed shareholders and potential investors about the true value of their investment is an issue common to all class members. Class certification requires only that the Court assess whether each element of plaintiffs’ claim can be resolved class-wide. The question of whether plaintiffs could succeed in showing that the alleged inflation persisted for the entire class period is properly ad*494dressed after class certification.193

3. Adequacy of Representation

Hayes also claims that the Court failed to find by a preponderance of the evidence the adequacy of the representation with respect to plaintiffs’ counsel.194 In the June Opinion and Order, I appointed class counsel pursuant to Rule 23(g), noted that several of the findings that I made in 2004 regarding class certification would not change even when evaluated against the preponderance of the evidence standard, and found that plaintiffs had satisfied the adequacy of representation requirement with respect to class representatives.195 I will now address the adequacy of representation with respect to plaintiffs’ counsel.

In order to conclude that the adequacy of representation requirement has been satisfied, courts must determine that “plaintiffs attorneys are qualified, experienced and able to conduct the litigation.” 196 Each of the firms that comprise the Committee has tremendous experience in complex securities litigation.197 They have secured multi-million dollar settlements in a number of class actions, have won awards for their advocacy, and been praised by judges in other litigation.198 They have expended enormous resources to litigate these actions and negotiate this settlement, as is clear from the documentation they have submitted in support of their fee and expense request. They are knowledgeable about the issues and have vigorously represented the interests of class members. Hayes notes that counsel are inadequate because the recovery they negotiated was small compared to the expected damages,199 but that is properly an objection to plaintiffs’ counsel’s fees, rather than to the adequacy of their representation. I therefore hold that the adequacy of representation requirement has been met.

4. Knowledge

Leslie Baum, Mike Hart, and Sue Shadley, through counsel, filed a joint letter contending that the new settlement class definition does not resolve the question of knowledge.200 They note that although the *495settlement classes have been narrowed to exclude those institutional investors who received allocations in the IPOs, they do not exclude natural persons who were identified as recipients of an allocation of shares from the “institutional pot.”201 However, the Second Circuit in Miles I was largely concerned with the knowledge of institutional investors who were initial allocants and their employees.202 Also, the Amended Master Allegations state that “the overwhelming majority of retail allocants, who generally receive relatively small allocations, also traded in ignorance of the scheme, as the Underwriter Defendants focused their requirements on certain investors, who generally receive relatively large allocations.”203

Additionally, this Court has held that plaintiffs are entitled to a presumption of reliance.204 While some natural persons who received initial allocations may have possessed knowledge of the scheme, objectors have not produced evidence to show that the number of such investors was more than a very small percentage of retail investors. Thus, the presumption remains unrebutted.

Finally, in Miles I, the Second Circuit noted in particular plaintiffs’ identification of more than eleven thousand institutions and individuals that were allegedly induced into improper trading arrangements by defendants, ruling that this statistic called into doubt the vitality of the presumption of reliance.205 Plaintiffs have determined that seven thousand “unique entities (other than natural persons) [] received allocations from an institutional pot list.”206 That means that only four thousand retail allocants may have been aware of the scheme. When these investors are compared to the more than one hundred thousand class members who have submitted proofs of claim thus far, it is clear that common issues will predominate over individual issues. The exclusion of institutional investors who were initial allocants from the classes therefore resolves the predominance problem.

5. Reliance

Baum, Hart, and Shadley also challenge the application of the Affiliated Ute presumption to cases involving price manipulation.207 They cite to the Ninth Circuit case of Desai v. Deutsche Bank Securities, Ltd. for the proposition that the presumption is only applicable to cases that “ ‘can be characterized as ... primarily alleging] omissions’ ” and that “ ‘manipulative conduct has always been distinct from actionable omissions.’ ” 208 Because the Court held in its June Opinion and Order that plaintiffs had failed to show by a preponderance of the evidence that the markets for shares were efficient during the quiet period for each stock and therefore that plaintiffs are not entitled to rely *496on the Basic presumption,209 Baum, Hart, and Shadley argue that the class should exclude all investors who purchased during the quiet periods.210

However, Affiliated Ute itself was a case based on manipulative conduct. Affiliated Ute involved the partition of the assets of the Ute Indian Tribe of the Uintah and Ouray Reservation in Utah.211 According to the articles of the Ute Distribution Corporation (“UDC”) — -the corporation that was established for the purpose of managing the assets — any mixed-blood shareholder wishing to sell his shares in the UDC was required to offer a right of first refusal to other full-blood and mixed-blood members of the tribe prior to making the same offer to a non-member.212 In violation of the UDC articles, two non-Indian men — employees of the bank that was the transfer agent of these shares — concocted a scheme whereby they solicited and purchased UDC shares from mixed-blood Indians for themselves or for other non-Indian purchasers and made a profit doing so.213 The Supreme Court concluded that “defendants had devised a plan and induced the mixed-blood holders of UDC stock to dispose of their shares without disclosing to them material facts that reasonably could have been expected to influence their decisions to sell” such as that they were profiting from their purchases of shares.214 The Court thus held that in this situation, involving “primarily a failure to disclose, positive proof of reliance is not a prerequisite to recovery.”215

Similarly, here, plaintiffs allege that defendants engaged in a scheme to induce the purchase of IPO shares at inflated prices and for undisclosed compensation and also sustained the price inflation by publishing misleading analyst reports.216 They further allege that defendants failed to disclose the nature of the scheme and the underwriter and analyst compensation in the prospectuses that were sent to investors.217 The Supreme Court specifically contemplated that Affiliated Ute would apply in this situation. And the Second Circuit has given no indication that the Affiliated Ute presumption should not apply in this case.218 This argument is therefore rejected.

6. Conclusory Objections

Finally, a number of objectors argue conclusorily that the settlement classes should not be certified because the revised class definition does not adequately resolve issues of reliance, causation, and ascertain-ability.219 In my June Opinion and Order, *497I discussed in detail plaintiffs’ burden in meeting these requirements. I found that plaintiffs had demonstrated by a preponderance of the evidence that reliance and loss causation could be proven on a class-wide basis and determined that the settlement classes were ascertainable. Nothing in these objections persuade me of the need to revisit the conclusions in my June Opinion and Order. I am therefore fully satisfied that plaintiffs have demonstrated by a preponderance of the evidence that the class certification requirements have been met.

C. Plan of Allocation

A Plan of Allocation has been recommended by plaintiffs’ counsel, a group of competent and qualified counsel. As such, I need only review the plan to confirm that it has a reasonable, rational basis. After a thorough review of the plan, I conclude that it is fair and reasonable.

Because defendants would only agree to a global settlement of all of the actions, the parties propose a minimum designation from the Settlement Fund of $300,000 per case in this settlement.220 Plaintiffs’ counsel assert that the purpose of this “floor” is to allow class members from each of the actions to participate meaningfully in the proposed settlement even where the expected damages for such action was comparatively small.221 Only thirty-five cases will receive a $300,000 minimum designation, and the total additional designations to these cases is $3,925,139 over the amount that would be paid if no “floor” were to apply.222 Because only a small portion of the gross settlement fund is deducted in order to provide these minimum designations and such decrease in the fund affects the remaining 274 actions equally, I find that these minimum designations are reasonable and just.

According to the Plan of Allocation, each Authorized Claimant will receive a pro rata share of the Net Settlement Fund in proportion to the damages he or she sustained.223 Where Subject Securities are purchased and sold during the class period, an Authorized Claimant’s “Recognized Claim” is calculated as the lesser of either the difference between the alleged inflation of the shares at the time of purchase and the alleged inflation at the time of sale or the difference between the purchase price paid and the sales proceeds re*498ceived.224 Where Subject Securities are purchased during the class period and held throughout the rest of the class period, the Recognized Claim is equal to the inflation per share at the date of purchase multiplied by the number of shares purchased during the class period.225

The Plan of Allocation also provides a minimum claim amount. Each Authorized Claimant with a valid Recognized Claim will receive — at a minimum — ten dollars no matter how small his, her, or its Recognized Claim.226 Many of the objectors have calculated their recovery to be insubstantial. They complain that the proposed settlement is insufficient to cover postage for the proof of claim and the efforts expended to retrieve documents.227 Just as the minimum designation amounts are necessary and reasonable to enable each case to participate meaningfully in the proposed settlement, a minimum claim amount is required to enable class members with relatively small claims to participate meaningfully.

Finally, any excess from the Net Settlement Fund in a case will be re directed to satisfy the Recognized Claims of Authorized Claimants in all other eases.228 No Authorized Claimant will be paid more than his or her Recognized Claim until all Authorized Claimants have been paid fully.229 In the unlikely scenario that there are remaining funds after distribution, they will be pooled together and distributed to all Authorized Claimants in proportion to each Authorized Claimant’s “Unpaid Market Loss.” 230 No objections have been received with respect to the Plan. Because I find that the Plan is fair and reasonable, it is hereby approved.

D. PSLRA Awards

The Committee has submitted a request for PSLRA awards on behalf of 439 lead plaintiffs, class representatives, and settlement class representatives in the 309 actions. As explained in the Notice, the Committee is seeking no more than four million dollars in awards for class representatives.

Section 27(a)(4) of the PSLRA mandates that a class representative should not receive a greater share of the settlement than other class members.231 Nevertheless, it also permits this Court to award “reasonable costs and expenses (including lost wages) directly relating to the representation of the class.” 232 In a number of recent district court decisions in this Circuit, the court declined to award reasonable fees and expenses where the representative failed to show how the expenditure of time “ ‘resulted in actual losses, whether in the form of diminishment in *499wages, lost sales commissions, missed business opportunities, use of leave or vacation time or actual expenses incurred.’”233 Indeed, the language of section 27(a)(4) indicates the intent that no class representative benefit disproportionately from a settlement.

The Court has reviewed all of the declarations submitted in support of the PSLRA applications. Each declaration is based on a form declaration; the only unique information is the hours the representative attests to spending on the litigation and his or her hourly wage, if employed.234 If the representative was employed by the hour, he or she was instructed by counsel to provide his or her highest hourly rate.235 If the representative was employed in salaried work, he or she was instructed to take his or her highest annual income and divide it by 2,080 hours to determine the appropriate hourly rate.236 If the representative was not employed during the litigation, he or she was instructed by counsel to request an hourly wage of twenty-five dollars per hour.237 In some declarations, the paragraph that provides this information in-eludes the following sentence: “Had I not been working on this litigation, the time I spent would have otherwise been directly devoted to my employment as a ___ and therefore amounts to foregone income opportunities.” 238 Other declarations do not contain this sentence.239

Each declaration further provides that the representative reviewed drafts of pleadings, pleadings, and other documents pertinent to the litigation.240 Each representative also attests to having completed a “detailed” questionnaire that was provided to defendants.241 Each declaration states that the representative has not been “provided or promised any consideration or benefit, directly or indirectly....”242 Finally, each declarant states that “[a]t all times during this litigation, I have taken my obligations as representative party seriously and have been committed to performing my duties in a manner that benefits the best interests of the Class.”243 Plaintiffs’ counsel, David Kessler, informs the Court that a number of focus case representatives sat for depositions during the litigation and their declarations reflect the work performed for those deposi*500tions.244

Those representatives who were unemployed during the litigation have submitted declarations attesting that they were not working and requesting twenty-five dollars per hour for work performed on this litigation. The PSLRA makes clear that only lost wages may be awarded. Simply put, unemployed representatives cannot show that they incurred any lost wages. Their requests are therefore denied.

The requests of those representatives who were employed during the litigation but who attest only to the hours spent on this litigation and their hourly rate are also denied. These representatives make no mention of having lost wages as a direct result of the work performed on these cases and thus are not entitled to awards for lost wages.

That leaves those representatives who were employed during the litigation and who attest that they “would have” otherwise devoted time spent on this litigation to their employment. I note that the declarations of these representatives fail to give further details of the vacation time foregone to perform work for this litigation or that work for this litigation was performed during normal working hours. Such generalized assertions would, under other circumstances, be insufficient. Nevertheless, given the extraordinary length of this litigation and the difficulties I suspect many representatives encountered difficulties identifying the occasions in which lost wages were incurred, such assertions are sufficient. However, I cannot refrain from making certain observations regarding these requests.

As noted by a number of objectors who appeared at the fairness hearing, some of the requests are plainly excessive.245 For instance, Saswata Basu — a class representative and settlement class representative in the Lante Corporation, Neoforma, On-via.com, Ventre Corporation, Corvis, and Avenue A actions and lead plaintiff in the Lante Corporation, Neoforma, Corvis, and Avenue A actions — attests to spending 1,200 hours “monitoring the progress of the case” and reviewing “drafts of pleadings, pleadings, discovery requests and various status letters” provided by counsel in this litigation.246 Because he is an entrepreneur who would have otherwise spent the time on other opportunities, he asks for $500 per hour.247 Basu thus requests a total of $600,000 for his representation of the classes.248 Such request is exorbitant when measured against any scale of reasonableness.

A number of representatives hold executive positions in corporations and are paid handsomely. For instance, Marc Gelman, lead plaintiff, class representative, and settlement class representative for ITXC, is the Chief Executive Officer of Enhanced Affordable Development and ZRS Construction.249 He asks to be paid at his hourly rate of $2,000.250 He attests to spending thirty-five hours performing work as a class representative and therefore requests a total award of $70,000.251 *501Jack Schwartz, lead plaintiff of Drkoop. com, is the President of Jack Schwartz Shoes, Inc.252 In that capacity, he makes $1,200 per hour.253 Because he spent 120 hours on this litigation, he requests an award of $144,000.254

In yet other instances, class representatives requested a fee award that exceeds the hours spent working on this litigation multiplied by their hourly rate.255 The declarations provide no explanation for why the requested amount exceeds the lost wages.

After reviewing all of the declarations, I am imposing the following rules to ensure the reasonableness of the fee awards. First, I have limited the hours expended by each representative eligible to receive an award to the median number of hours expended by focus case representatives and the median number of hours spent by non-focus case representatives. The median number of hours for focus case representatives is one hundred hours. The median number of hours spent by representatives in non-focus cases is fifty hours. Although a number of individuals are serving as class representatives in multiple actions, all 309 actions have proceeded during the last eight years as one consolidated action, and these representatives should not have performed a substantially greater amount of work than those who are representatives in only one action.

Second, I am also imposing a two hundred dollar cap on the hourly rate of all representatives. This is appropriate given that all representatives were instructed by counsel to provide their highest hourly rate notwithstanding that this litigation has been ongoing for eight years, and therefore, these individuals may not have been earning the hourly rate requested for the entire period. In addition, awarding these individuals such high rates without documentation substantiating their compensation or providing further details regarding specific instances of lost wages would be unjust.

Third, some class representatives attested to being employed for only part of the litigation period, without specifying the length during which they were employed. For those representatives, I limited the number of hours of work performed at half of their reported hours.

Fourth, a few class representatives also request out-of-pocket expenses. For instance, Abraham Kassin, a class representative and settlement class representative in nineteen actions and lead plaintiff in seven actions, requests $18,960 in expenses for “obtaining documents, copying documents, [] shipping documents, and meeting with counsel, among other things.”256 There is no itemized list, nor are any receipts attached to substantiate these costs. Another representative attaches receipts to substantiate his expenses, but there is also an indication that the expenses were already reimbursed by plaintiffs’ counsel.257 Only one representative *502attests to having incurred out-of-pocket expenses of fifty dollars and informs the Court that receipts will be produced if requested.258 Because no representative properly submitted an itemized list of expenses, attached receipts, and attested that none of the expenses had already been reimbursed, I decline to grant any request for out-of-pocket expenses.259

Based on the above rules, I have determined the awards of each lead plaintiff and class representative. A list of these awards is appended to this Opinion and Order as Exhibit 1. The PSLRA awards for class representatives total $1,303,593.05.

E. Attorneys’ Fees and Reimbursement of Expenses

Almost all of the objectors criticized the amount of the requested attorneys’ fees, claiming that plaintiffs’ counsel are getting a big pay day at the expense of class members. Without denigrating these objections, one point is worth making at the outset. A class action is a policy device that was designed to “overcome the problems that small recoveries do not provide the incentive for any individual to bring a sole action prosecuting his or her rights. A class action solves this problem by aggregating the relatively paltry potential recoveries into something worth someone’s (usually the attorney’s) labor.” 260 It is precisely the promise of a reasonable fee that encourages plaintiffs’ attorneys to accept cases such as these and risk spending their own financial resources and personal efforts for years until recovery can be obtained for the class. Nevertheless, the Second Circuit has instructed district courts considering fee requests by class action counsel to act “as a fiduciary who must serve as a guardian of the rights of absent class members.”261

1. Reimbursement of Expenses

The Committee requests $50,354,709.03 in expenses on behalf of all of the firms that comprise plaintiffs’ counsel.262 These expenses alone represent approximately 8.6 percent of the gross settlement fund. In support of these expenses, the Committee has submitted a summary expense report for each of the firms comprising the Committee and a summary report of the expenses for all of the other firms.263 *503These costs include routine expenses relating to copying, court fees, postage and shipping, staff overtime, phone charges, and travel and transportation.264 Plaintiffs’ counsel also request the reimbursement of those expenses incurred and paid for by the Plaintiffs’ Litigation Fund (the “Fund”), to which each firm contributed, for a total of $14,174,318.32.265 The Fund was used for similar routine expenses such as copying and travel costs, as well as other costs unique to this litigation such as bank charges, rental and relocation costs associated with a document depository, and temporary personnel.266

As noted, the Court entered an Order on August 17, 2009 directing the Committee to post counsel’s fee and expense application on the IPO website and allowing class members an additional period within which to submit objections to that application.267 Although a number of attorneys and class members objected generally to the fee application — in writing and at the fairness hearing — only one objection was received with respect to the expense request.

The objection letter, submitted on September 8, 2009 by counsel for class members James J. Mary, Mark Merrill, Vondell Tyler, Ernest Browne, Jr., and Susan Browne, asks the Court to scrutinize the expense request carefully.268 The letter notes that no substantiation of any of the expenses has been submitted in order to allow the Court to properly ensure that reasonable rates were charged for items such as copying and travel expenses.269 The letter also raises a question regarding the firms’ request for reimbursement of their contributions to the Fund, noting that many of the Fund’s expenses have also been requested in each individual firm’s summary report.270 Finally, the letter argues that the Court should deny counsel’s request for computerized research fees, contending that these charges are properly part of a law firm’s overhead and should not be charged to the class.271

On September 17, 2009, the Committee submitted a response to this objection. In its submission, the Committee represents that most of the firms charged ten cents per copy, but noted that reimbursement of copying at a rate of twenty-five cents per copy is “not uncommon.” 272 The Committee also represents that there is no overlap between the expenses incurred by each firm and the expenses incurred by the Fund.273 Moreover, the Committee argues that the Second Circuit has allowed reimbursement of computer research fees as part of a fee award.274 It also notes, in *504any case, that the costs under the category of “Computer & Other Research Fees” include primarily expenses associated with electronic discovery management.275 Finally, the Committee concedes that some of its attorneys may have flown business or first-class when traveling, but notes that “[t]he instances were limited, [ ] and in the exercise of each lawyer’s business judgment.” 276

The Committee attaches a list itemizing the combined expenses under each category of the firms comprising the Committee, the fifty other firms, and those paid for from the Fund.277 On September 14, 2009, this Court issued an Order directing the Committee to file a declaration explaining any guidelines imposed on counsel with respect to travel charges, phone charges, copying costs, and other expenses.278 In response, Stanley Bernstein, Chair of the Committee, submitted a declaration stating that the Committee “limited to $250 the daily living expenses of out-of-town personnel traveling to New York for long-term assignments at the IPO headquarters.” 279 Bernstein also attests that each firm was expected to “charge its expenses at its customary rates and as it would in the normal course of business.”280

Although the Committee has attempted to clarify some of the rates underlying the various costs for which plaintiffs’ counsel are collectively requesting reimbursement, its submission is woefully inadequate. While submitting receipts to substantiate every expense would have been unreasonably taxing on counsel and burdensome for the Court to review, counsel’s request is otherwise unsupported by any detailed information upon which the Court can rely in ascertaining whether the rates charged are reasonable. For instance, plaintiffs’ counsel are asking for over four million dollars in commercial copying costs, but have not provided information related to the per-copy cost they are charging nor the number of copies made. The Committee argues that “[m]ost firms charged $0.10 per copy,” but it does not identify which portion of the costs were charged at that rate, nor does it inform the Court of the reasons why so much copying appears to have been sent outside of the firms. Although it is unclear what the difference is between “Commercial Copies” and “Reproduction,” the Court will assume — to the Committee’s benefit — that “Reproduction” is the category of expenses detailing charges due to in-house copying while the category of “Commercial Copies” includes charges related to outside copying. Accordingly, I am reducing expenses associated with “Commercial Copies” by thirty percent to account for copies that could have been made in-house. I am also reducing “Reproduction” expenses by ten percent to account for those firms who charged more than ten cents per copy.

Some of the firms comprising the Committee are requesting reimbursement of costs related to secretarial and other staff overtime, but it is unclear how many overtime hours were worked or at what hourly rates.281 I am therefore also reducing the *505expenses related to such overtime costs by fifty-seven percent.282 I have also reduced the costs associated with “Temporary Personnel” by the same percentage.

A $250 per day limit on lodging and meal expenses seems reasonable. However, no reasons are given for why some of these firms incurred hotel costs for their attorneys when the New York office of their firm was spearheading this litigation.283 In addition, the Committee concedes that some attorneys may have flown business or first-class to work on this litigation. A cap that includes only lodging and meals has little significance if no limit exists for airfare and other travel costs. I am therefore reducing travel costs by twenty percent.284

Finally, because the Second Circuit has allowed expenses associated with computer research fees to be reimbursed, I am reimbursing the costs of all such research.285 The Committee has also represented that it has not included in the Fund request any expenses that are duplicative of the expenses reported by individual firms.286 I accept this representation. Plaintiffs’ counsel are therefore awarded reimbursement of expenses in the total amount of $46,941,556.96.

2. Award of Fees

In addition to over fifty million dollars in expenses, the Committee also requests a total fee of one-third of the gross settlement fund, or $195 million, for all counsel.287 Although only a few of the objectors expressed concern regarding the expense request, almost every objector opined that the fee request in this case is unreasonable.

a. Counsel’s Lodestar

Although I intend to use the percentage method to award fees in this matter, the lodestar is often used as a cross-check. I will therefore review the requested lodestar before evaluating the Goldberger factors.

The Committee contends that its lodestar is $278 million. In support of this lodestar, the Committee has submitted a summary of the hours expended by and *506the billing rates for every attorney, paralegal, and staff member that worked on this litigation over the last eight years. Because the lodestar is being used merely as a cross-check, it is unnecessary for the Court to delve into each hour of work that was performed by counsel to ascertain whether the number of hours reportedly expended was reasonable.288 However, a review of the rates charged by counsel suggests that there is ample room for downward adjustment.

First, I note that the rates charged are the current billing rates of each attorney, paralegal, and staff member.289 In those cases in which the attorney has since left the firm, the Committee used the attorney’s rate at the time of departure.290 In a litigation as long as this one, it is obvious that current billing rates are likely to be much higher than those used in 2001. In fact, during the eight years of this litigation, a junior associate could have been promoted to partner, and his or her billing rate could have increased two or threefold. It would therefore be unreasonable to apply his or her current billing rates to all of the hours worked throughout the eight years of litigation. I therefore find the rates charged by counsel to be excessive.291

Second, although the appropriate hourly rates are “ ‘those [rates] prevailing in the community for similar services of lawyers of reasonably comparable skill, experience, and reputation,’ ” 292 I note that it is often the practice among law firms to accord clients a discount on fees while maintaining high billing rates. Therefore, while a partner’s stated hourly rate might be nine hundred dollars per hour, the client may not actually pay this rate. In addition, a number of firms have begun utilizing flat fees, which are often substantially less than the fees a firm would receive if it billed by the hour.293

Based on these two observations, I have decided to reduce the hourly rates of all attorneys and paralegals and recalculate the Committee’s lodestar. In determining maximum rates for partners and associates, I considered the proposed hourly rates of the most senior partners and associates. For instance, Arthur Miller of Mil-berg LLP charges $995 per hour. Such rate is clearly exorbitant. Although senior partners from large law firms were known to charge such rates in 2007,294 it is hard to imagine clients from almost a decade ago, much less today, paying such rates. While the Committee may argue that Miller’s high billable rate is justified by his status *507as a nationally renowned scholar of civil procedure, his expertise in that field was not instrumental in this case.

I therefore capped partners’ fees at five hundred dollars per hour and assigned that rate to only the most senior partners at each firm. Senior associates were assigned a rate of three hundred dollars per hour. The rates for partners and associates decrease according to experience. Where the Committee provided attorney biographies, I reviewed that information when assigning a reasonable billable rate for a particular lawyer. Where the Committee failed to provide such information— which is the case for a large portion of the attorneys who worked on this matter— there was no way for me to ascertain the experience of the attorneys. Because most junior partners for whom I had information were assigned a rate of $425 per hour, partners for which I had no information were assigned the lesser of $425 per hour or that particular partner’s requested rate. Because most junior associates for whom I had information were assigned a rate of two hundred dollars per hour, associates for whom I had no information were assigned the lesser of two hundred dollars per hour or that particular associate’s requested rate.

Finally, all paralegals were assigned either the lesser of their requested rate or one hundred dollars per hour. The requested rate of compensation for paralegals was both shocking and unconscionable. The maximum requested fee for such service was $355 per hour. Typically, a paralegal is a college graduate with no legal training whatsoever. My assigned rates are more than reasonable, considering the lack of professional information for a number of the attorneys and my decision not to reduce the number of hours counsel assert was spent on this litigation.

I note that the Committee also requested compensation for work performed by clerks. Clerks are identified separately from paralegals, even though it is unclear what type of work a clerk performs and how it differs from that performed by paralegals. I can only assume that clerks perform work that is similar to that done by secretaries and other support staff. In addition, compensation is sought for a number of individuals who are identified as “other.” I assume that this category includes secretaries and other support staff. Because the salaries of secretaries and other support staff are usually considered overhead costs and included as part of the attorneys’ fees, I am denying compensation for clerks and those individuals under the “other” category.295 I also excluded the lodestar of experts and investigators because their fees were already included the expense request. The “adjusted lodestar” for the Committee is therefore $159,099,407.75.

No lodestar summaries were provided by the fifty other plaintiffs’ firms in support of their one hundred million dollar lodestar. This number appears to be an estimate rather than actual calculation. Based on the lack of information supporting this figure, I am reducing the lodestar of these firms by the same percentage as the Executive Committee firm with the *508highest percentage reduction — fifty-seven percent.296 The “adjusted lodestar” for the fifty other firms is $43,260,015.88. The “total adjusted lodestar” for all firms is therefore $202,359,423.63.

b. Goldberger Factors

Having determined the appropriate lodestar for purposes of comparison, I turn next to the Goldberger factors to determine the reasonable fee that should be awarded in this case. I will discuss each factor in turn.

i. Time and Labor Expended by Counsel

As noted, the Committee has expended over 677,000 hours,297 producing an adjusted lodestar of more than $159 million. The Committee expects additional time to be expended in conjunction with the approval of the proposed settlement and the administration and distribution of the settlement funds.298 These amounts do not include the hours and lodestar of the over fifty firms that were involved in this litigation. Collectively, those firms have reported spending over 350,000 hours on this litigation 299 and almost forty-three million dollars in adjusted lodestar.

In some ways, these extraordinary figures are not surprising. As discussed in this Court’s evaluation of the Grinnell factors, this litigation spanned eight years and has involved the review of over thirty million pages of documents and the taking of 145 depositions.300 The parties briefed numerous procedural and substantive motions,301 after which this Court issued twenty-nine opinions. The Court of Appeals has issued three opinions resolving various motions filed by the parties, each of which were preceded by extensive briefing and oral argument.302

ii. Magnitude and Complexities of the Litigation

This litigation will certainly go down in history as one of the longest and most protracted multi-district securities litigations in the country. Over one thousand initial complaints were filed.303 The actions were filed against fifty-five securities underwriters, over three hundred issuers, and one thousand officers and directors of the issuers.304 Defendants were represented by over 110 law firms, not including the law firms that represented insurance companies with an interest in the litigation.305

Plaintiffs’ counsel submitted more than three hundred amended pleadings in the actions, successfully defended against and opposed numerous motions to dismiss, and briefed and argued three hotly contested class certification motions.306 In addition, counsel engaged in extensive discovery efforts, including the serving of over six hundred third-party subpoenas and the retention of twelve experts.307

*509Not only were the cases factually complex, but the issues were also legally complicated. Defendants consistently maintained that the allegations in the Complaints should be dismissed and that plaintiffs would fail to prove “liability, loss causation, damages or that the classes were even appropriate for certification.”308 The Notice of Pendency sets out additional key issues upon which the parties disagreed, including (1) whether the alleged misconduct by the defendants was actionable; (2) whether the alleged omissions and misrepresentations were material; (3) whether there existed an appropriate economic model for determining artificial inflation during the settlement class period; (4) the amounts by which the Subject Securities were allegedly inflated during the period; (5) the extent to which other market forces influenced the trading prices of the Subject Securities during the period; and (6) the extent to which the conduct of defendants and their statements allegedly influenced the trading prices of the Subject Securities during the period.309

iii. The Risk of the Litigation

Plaintiffs’ counsel have not been paid any fees during this litigation.310 Counsel have advanced millions of dollars and attorney hours without reimbursement.311 Of course, this is not unusual in class actions, and plaintiffs’ counsel concede that they undertook this complex litigation knowing that fees and costs would only be paid upon a successful outcome.312 That is precisely what they did, completing eight years of work and demonstrating a commitment to vigorously prosecuting plaintiffs’ claims.

Although “[i]t is well-established that litigation risk must be measured as of when the case is filed,”313 the risk of losing it all was heightened with the Second Circuit’s decision in Miles I. The findings in Miles I dramatically increased the risks of continuing this litigation by severely restricting the class size and reducing the estimated aggregate damages.

Counsel could have thrown up their hands at this juncture, reasoning that further efforts would likely fail to lead to any concrete results. Instead, they petitioned the Court of Appeals for a rehearing (resulting in Miles II) and filed amended complaints in each of the six focus cases and an amended set of “Master Allegations” that re-defined the class pursuant to the Second Circuit’s rulings.314 They also submitted extensive briefing opposing defendants’ motions to dismiss.315 After this Court largely denied defendants’ motions,316 counsel then moved for class certification again. In response, counsel notes, defendants “unleashed an army of countervailing expert reports.”317 Plaintiffs’ counsel then engaged in protracted settlement negotiations with defendants that lasted nine months.318 There was a seri*510ous risk that work performed even in the last three years would fail to yield any results.

iv. The Quality of Representation

I have presided over these cases since their commencement and have nothing but the highest respect for the professionalism of the many attorneys that comprise the Committee. These law firms are some of the most reputable in the country — the “cream of the crop” among plaintiffs’ firms. Over the years, they have recovered millions, if not billions, of dollars for their clients.319 In addition, many of them have received judicial accolades for their efforts in other litigations.320

Indeed, the hurdles overcome in this litigation further underscore the high quality of representation by plaintiffs’ counsel. Not only did counsel successfully defend against numerous motions to dismiss, but they also exhibited extraordinary perseverance when they petitioned the Court of Appeals for rehearing of Miles I and obtained clarification in Miles II that the action was not precluded from continuing, albeit with certain restrictions. Finally, notwithstanding the reduction in the expected damages and class size, counsel was able to negotiate a fair settlement with defendants.

Courts have also looked to the quality of defense counsel as an indicator of the quality of representation of plaintiffs’ counsel.321 Here, plaintiffs’ counsel were pitted against 110 of the most prominent national defense firms, including Sullivan & Cromwell LLP and Morrison & Foerster LLP, liaison counsel for the defendants. That plaintiffs’ counsel were able to prosecute this action for eight years against such formidable opponents is an impressive feat.

Still, the Second Circuit has held that “the quality of representation is best measured by results, and that such results may be calculated by comparing ‘the extent of possible recovery with the amount of actual verdict or settlement.’ ” 322 In this case, plaintiffs’ counsel has admittedly been able to secure only two percent of the estimated damages. Although the Circuit also opined in Grinnell that for the purposes of approving a settlement, a “satisfactory” settlement could represent one-thousandth of one percent of the estimated damages in an action,323 a recovery of two percent is surely on the low end of any spectrum. Indeed, this is one case in which the result is underwhelming despite counsel’s best efforts. This factor weighs in favor of reducing the fee award.

v. The Requested Fee in Relation to the Settlement

Not only is the recovery in this case small, but the stark difference between counsel’s fee request and each class member’s share of the settlement gives this Court great pause. The request for attorneys’ fees and expenses amounts to approximately forty-three percent of the gross settlement fund. If this amount were awarded, the class members would recover less than one cent on every dollar *511lost.324 This remains the case even considering the reduction in the PSLRA awards and counsel’s expenses.325 Indeed, the Committee admits that the fee request is on “the higher side of the range of fee requests.” 326 This factor also weighs in favor of reducing the fee award.

vi. Public Policy Considerations

Finally, I consider what fee would adequately encourage plaintiffs’ counsel to continue bringing cases of merit in the future. Courts have noted that in considering this factor, “[t]he fees awarded must be reasonable, but they must also serve as an inducement for lawyers to make similar efforts in the future.” 327 Certainly, plaintiffs’ counsel would not have taken this case and vigorously prosecuted the action had it not been for the expectation of a reasonable fee at the conclusion of the litigation. That counsel continued to zealously represent class members in this litigation even after a devastating loss before the Court of Appeals is a testament to their commitment. Such tenacity should be rewarded.

Nevertheless, objectors urge this Court to consider another public policy issue. They suggest that plaintiffs’ counsel settled this action for pennies on the dollar in order to ensure payment of their fees.328 Some objectors even accuse plaintiffs’ counsel of “blackmailing]” defendants— implying that they brought these claims for the sole purpose of settling with defendants and obtaining compensation.329 The objectors ask the Court not to endorse such tactics.330

*512After many years of presiding over class action securities cases, I note that there is an inherent conflict of interest between plaintiffs’ counsel and the class members they represent.331 As Douglas Parker expressed at the fairness hearing, from class members’ perspectives, the recovery in these cases is so small that proceeding to trial would pose little risk for class members and refusing to participate in the settlement would present little loss.332 Instead, it is plaintiffs’ counsel with the most at stake. Plaintiffs’ counsel therefore have a strong incentive to settle, even if the recovery obtained is a fraction of the expected damages. Indeed, because plaintiffs’ attorneys exercise control over class actions, they may be motivated to file dubious claims seeking large damages with the expectation that the litigation will settle and they will be compensated handsomely.333

However, any suggestion that by approving this settlement and awarding counsel fees, this Court is somehow encouraging the plaintiffs’ bar to file merit less claims is simply wrong. It may be true that the viability of plaintiffs’ claims from the start was doubtful — their claims were certainly called into question when the Circuit found plaintiffs’ allegations of widespread knowledge to negate reliance and opined that the IPO markets were not efficient. But the Circuit also dealt an unexpected blow to counsel by modifying its class certification standards — making it more difficult for these classes to be certified — in the middle of this litigation. Even after Miles I substantially narrowed the claims in this litigation, plaintiffs’ counsel were still able to negotiate a settlement with defendants. The fact that defendants agreed to settle at all indicates that plaintiffs’ claims were not entirely meritless.

Moreover, although I am mindful of these concerns, forcing this case to go to trial will not benefit anyone — not plaintiffs’ counsel, not the defendants, not this Court, and certainly not class members who have been waiting nearly a decade for some recovery and resolution of this litigation. Indeed, disapproving this settlement would have a significant chilling effect on future class actions — a bad result at a time when serious questions have been raised over *513the conduct of many banks during the recent financial crisis.334

c. Specific Objections and Counsel’s Responses

After giving great thought to the Goldberger factors, I now turn to specific objections I have received with respect to the requested fee and the Committee’s responses. A number of objectors — pointing to the Second Circuit’s decision in Goldberger dismiss plaintiffs’ counsel’s request as out-of-hand.335 In Goldberger, plaintiffs’ counsel requested a fee of twenty-five percent of the settlement, but the district court awarded only a four percent fee.336 The Court of Appeals held that this award was not an abuse of discretion, notwithstanding awards in similar common fund cases in the range of eleven to nineteen percent.337

The objectors also note that courts have routinely decreased the percentage fee as the size of the fund increases.338 They argue that a fund of $586 million is certainly at the top of the range of settlement fund sizes and that plaintiffs’ counsel should therefore receive a percentage fee much lower than what they are requesting.339

Finally, some objectors contend that this Court should award- a percentage of the net settlement fund, rather than the gross settlement fund. For instance, David Murray and Jacqueline Pio, who appeared at the fairness hearing through counsel, opined that granting a percentage fee based on the gross settlement fund would mean that plaintiffs’ counsel would not only receive reimbursement for their expenses, but also a percentage of those expenses as part of their fee.340

The Committee responds that the requested fee is reasonable, comparing its request to other mega-fund cases in which the fee award was approximately thirty percent.341 In addition, the Committee ar*514gues that the global settlement represents 309 individual settlements, and it is therefore appropriate to consider cases in which the settlement amounts ranged from $300,000 to twenty million dollars.342 The Committee notes that a one-third fee appears to fall within the range of reasonableness for settlements within that range.343

It further notes that the fee requested represents a negative multiplier of 0.7 based on the lodestar calculated by the Committee.344 The inclusion of the lodestar of the other fifty firms produces a 0.5 negative multiplier.345 The Committee contends that “a negative multiplier fully supports a higher percentage fee request.” 346

Finally, with respect to objectors’ opinions that the percentage fee should be based on the net settlement fund, the Committee conceded at the fairness hearing that courts have awarded fees based on both the net and gross settlement funds.347 The Committee nevertheless emphasized that it believed its request was “fair.”348

d. The Court’s Award

After reviewing the Goldberger factors and considering the arguments by the objectors and by the Committee, I make the following determinations. First, there is simply no reason why plaintiffs’ counsel should be awarded a percentage of then-expenses in addition to being reimbursed for those reasonable expenses. I therefore find that the percentage fee should be based on the net settlement fund rather than the gross settlement fund.349

Second, there are certainly cases in which it would be reasonable to award a fee in the lower range of reasonableness. Indeed, the Second Circuit recently quoted one of my previous decisions in reasoning that “ ‘a given fee award must follow a sliding-scale and must bear an inverse relationship to the amount of the settlement. Otherwise, those law firms who obtain huge settlements, whether by happenstance or skill, will be over-compensated to the detriment of the class members they represent.’ ”350

Nonetheless, this principle cannot be considered in isolation without also review*515ing the amount of work and time spent by counsel in this litigation. For those cases in which settlement is quick and the time and labor expended by counsel is low, a high percentage fee would be a windfall and therefore inappropriate. Thus, in Goldberger and other recent Second Circuit class action fee decisions, the Circuit affirmed awards of a low percentage fee, but noted that such fees represented positive multipliers to counsel’s lodestar figures.351 This case is different. Here, counsel is requesting a high percentage fee, but that fee ($195 million) still represents a negative multiplier to the total adjusted lodestar as calculated by this Court ($202 million). There is therefore no real danger of overcompensation.

Third, in other cases for which I have awarded fees to counsel, I have applied an additional discount to the adjusted lodestar for limited success.352 There is plenty of support for doing the same here. Although plaintiffs’ counsel managed to resolve this litigation in favor of class members and obtained a large gross settlement fund, the results, in general, are disappointing. First, the per-share recovery is very small and class members are expected to receive only one cent on each dollar lost. Second, the settlement is based on a much smaller class and lower expected damages than contemplated at the commencement of this litigation. As a result, the discounted fee of fifty-two percent of the lodestar and a further discount of the adjusted lodestar is particularly appropriate where the fees awarded to the attorneys are taken from the settlement fund.

But counsel’s requested fee already reflects a discount because the amount of time and labor counsel spent on this litigation is highly disproportionate to the settlement they achieved on behalf of the class. Moreover, the incremental benefit to each class member is trivial.353 Quite frankly, reducing counsel’s fees will not put more money in class members’ pockets. Because counsel has already imposed a discount on its own fee, applying a further reduction will serve only to further penalize counsel and chill other class actions.

Finally, the important function that class actions serve in policing securities transactions should not be under-emphasized. Indeed, class actions serve as private enforcement tools when the Securities and Exchange Commission or other regulatory entities fail to adequately protect investors from securities fraud. Thus, plaintiffs’ attorneys need to be sufficiently incentivized to commence such actions in order to ensure that defendants who engage in misconduct will suffer serious financial consequences. Although the defendants in this action did not admit to wrongdoing by agreeing to settle, this class action succeeded — at the very least— in penalizing them for questionable con*516duct. Awarding counsel a fee that is too low would therefore be detrimental to this system of private enforcement.

I therefore award plaintiffs’ counsel a fee of one-third of the net settlement fund, which amounts to $170,084,950.00.354 This fee takes into account the risks counsel undertook to represent class members and the hard work that was put into resolving this litigation (particularly after the Miles decisions). It also appropriately accounts for the small recovery that was ultimately obtained for each class member.

Although the adjusted lodestar is used as a cross-check, there is no need for the adjusted lodestar and the percentage fee to be equivalent. Indeed, the only difference between the fee award and counsel’s request is that the fee award is based on the net rather than gross settlement fund. And the remaining difference between the adjusted lodestar and the Committee’s request is trivial.

This fee should therefore adequately compensate — but not overcompensate— counsel for their extraordinary time and labor. The award of fees and expenses are intended to compensate plaintiffs’ counsel for all of the time and labor spent until the conclusion of this litigation, including that associated with the distribution of the settlement fund.

y. CONCLUSION

For the reasons stated above, plaintiffs’ motion for an Order of Final Approval of the Settlement, Plan of Allocation, and Class Certification is granted. The Committee’s motion for Attorneys’ Fees and Reimbursement of Expenses and PSLRA Awards to the Lead Plaintiffs and Class Representatives of the 309 settled actions is also granted but not for the amounts requested. The Clerk of the Court is directed to close this motion [document no. 5837 in action 21 MC 92], this action, and the 309 individual actions that comprise this multi-district litigation.

SO ORDERED.

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In re Initial Public Offering Securities Litigation
671 F. Supp. 2d 467

Case Details

Name
In re Initial Public Offering Securities Litigation
Decision Date
Oct 5, 2009
Citations

671 F. Supp. 2d 467

Jurisdiction
United States
Court
United States District Court for the Southern District of New York

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