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U.S. Court of Appeals Affirms Unusually High Attorney Fee Award in Risky Shareholder Lawsuit

In a class action brought by Motorola investors it was maintained that during 2006, the company made false statements in order to disguise its inability to deliver a mobile phone for sale that would employ three different protocols. When it became public that Motorola could not produce the new mobile phone, its stock sank significantly. 

After the lawsuit had been pending for four years, the district court denied Motorola’s motion for summary judgment. After that, the parties settled for $200 million. The class members approved the settlement, but objected to the judge’s decision to award 27.5% of the settlement to the trial lawyers who represented the class.

One of the former class members filed an objection a month after the deadline. Though he filed an objection to the award of legal fees, the objector chose not to file a claim for his share of the settlement fund. As a result, the court of appeals concluded that the objector lacked any interest in the amount of attorney fees awarded and as a result, dismissed his appeal.

Another objector in the class argued that the award of attorney fees was improper because it was fixed at the end of the litigation rather than set out at the commencement of the lawsuit. The appellate court began by citing In re Synthroid Marketing Litigation, noting that establishing a fee structure at the outset of litigation is the preferred method, but not the only lawful method, for setting the compensation for counsel in a common-fund case.

Although the appellate court found that data on an award of 27% is exceptionally high for a case with a settlement of $200 million, it was not necessarily an illegally excessive amount.

The panel noted that the lawsuit was an “unusually” risky one as defendants tend to prevail in security cases and the case took more than 4 years to settle during which time the class counsel spent in excess of $5 million out-of-pocket on costs. In addition, the panel pointed out that at the beginning of the lawsuit, the risky nature of the claims meant that no other law firm was willing to serve as lead counsel. 

In conclusion, although the justices expressed concern over how the fee award was structured, it ultimately concluded that the district judge did not abuse her discretion in setting a high attorney fee award and affirmed the decision.

Eric Silverman, et al. v. Motorola Solutions, Inc., et al., Nos. 12-2339 and 12-2354 (7th Cir. U.S. Court of Appeals, August 14, 2013).

Kreisman Law Offices has been handling business litigation matters, commercial litigation and corporate disputes for more than 37 years in and around Chicago, Cook County and its surrounding areas, including Chicago (Ravenswood), Lockport, Oak Park, Park Ridge, Round Lake Beach, Schaumburg, Western Springs, Glencoe, Chicago (Edgewater), Chicago (DePaul University), Chicago (Bronzeville), Joliet and Arlington Heights, Ill. 

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