Antitrust Law Daily Wrap Up, ANTITRUST NEWS: $254M attorneys’ fees, $9M costs sought in credit default swaps conspiracy case, (Feb 1, 2016)

By Linda O’Brien, J.D., LL.M.

In a class action by investors against a group of major banks for allegedly conspiring to restrain trade in the market for credit default swaps, the plaintiffs and class counsel have requested an award of attorneys’ fees, reimbursement of expenses, and incentive awards for class representatives, in a motion filed in the federal district court in New York City (In re Credit Default Swaps Antitrust Litigation, Dkt. 1:13-cv-04928-DLC).

A credit default swap (CDS) is a financial derivative contract used for hedging credit risk in which the buyer pays the seller in exchange for the seller’s promise to make the buyer whole on an agreed amount in the event of a “credit event,” such as a default on the debt instrument by a third party.

Investors who purchased CDS from, or sold CDS to, several U.S. banks alleged that the banks conspired to prevent new entrants from successfully introducing exchange trading venues and electronic platforms in the CDS market that would have led to greater transparency and competition. The defending banks included Bank of America Corp.; JPMorgan Chase & Co.; The Goldman Sachs Group, Inc.; HSBC Holdings plc; Barclays Bank PLC; Citigroup Inc.; Deutsche Bank AG; Morgan Stanley & Co., LLC; Royal Bank of Scotland, N.V.; and UBS AG.

In October 2015, the court granted preliminary approval of a nearly $1.9 billion settlement to resolve the investors’ claims.

Class counsel fee request. According to the memorandum in support of the class counsel’s motion, a fair and reasonable fee for the plaintiffs’ counsel is $253,758,000, or approximately 13.61 percent of the settlement fund. First, the requested amount is consistent with the fee agreement negotiated with the lead plaintiff, Los Angeles County Employees Retirement Association (LACERA), which calculated fees based on a percentage of the recovery for the class. LACERA is a sophisticated investor and was actively involved in the settlement discussions.

Second, the reasonableness of the fee was confirmed by applying the “percentage method” of fee calculation used by the Second Circuit. The requested fees total $13.51 percent of the common fund, which falls within the range of fees found to be reasonable in this Circuit and is consistent with awards in other large antitrust cases.

Third, the requested fees were appropriate in light of (1) the risks of continued litigation, (2) the magnitude and complexities of the case, (3) the quality of representation and the amount of time and resources spent by counsel, and (4) the significant amount of the settlement. Additionally, public policy considerations favor the requested award, since it ensures the zealous enforcement of the law and provides incentives for skilled counsel to bring cases where the prospect of recovery is uncertain.

Fourth, the lodestar fee calculation method, used as a cross-check, supports the requested award as the multiplier falls within the range awarded by courts in this District and across the country.

Expenses. According to the motion, the expenses incurred by class counsel were reasonable and necessary in this complex antitrust case. The majority of these expenses were for professional services, including the plaintiffs’ experts.

Incentive awards. Finally, class counsel requested incentive payments for class representatives in the amount of $200,000 for LACERA and $193,700 for Salix. The class representatives actively participated in the litigation, including contributing valuable knowledge from trading CDS, helping to build damages models, and responding to discovery obligations. The requested awards are appropriate given the time expended and the risks involved in the litigation, the motion concluded.

Attorneys: Daniel L. Brockett (Quinn Emanuel Urquhart & Sullivan LLP) and Bruce L. Simon (Pearson, Simon & Warshaw, LLP) for plaintiffs.

Companies: Bank of America Corp.; JPMorgan Chase & Co.; Goldman Sachs Group, Inc.; HSBC Holdings plc; Barclays Bank PLC; Citigroup Inc.; Deutsche Bank AG; The Goldman Sachs Group, Inc.; Morgan Stanley & Co., LLC; Royal Bank of Scotland, N.V.; UBS AG; International Swaps and Derivatives Association

News: Antitrust NewYorkNews