1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 Juli E. Farris (SBN 141716) KELLER ROHRBACK, L.L.P. 1201 Third Avenue, Suite 3200 Seattle, Washington 98101 Telephone: (206) 623-1900 Facsimile: (206) 623-3384 [email protected]Attorneys for Moving Plaintiffs Additional Counsel on Signature Page UNITED STATES DISTRICT COURT EASTERN DISTRICT OF CALIFORNIA SACRAMENTO DIVISION GREGORY JOHNSON, et al., Plaintiffs, v. CLAIR R. COUTURIER, JR., et al., Defendants, No. 2:05-cv-02046 RRB GGH (Lead Case-Consolidated) NOTICE OF MOTION AND MOTION FOR AWARD OF ATTORNEYS’ FEES, REIMBURSEMENT OF EXPENSES, AND PLAINTIFF INCENTIVE AWARDS DARLEEN STANTON, Plaintiff, v. CLAIR R. COUTURIER, JR., et al. Defendants. No. 2:07-CV-01208 WBS-JFM (Consolidated under 2:05-CV-02046 RRB GGH) TO ALL PARTIES AND THEIR ATTORNEYS OF RECORD: PLEASE TAKE NOTICE that in connection with the Parties proposed Settlement of this litigation, the Plaintiffs, pursuant to Fed.R.Civ.P. 54(d)(2)(B), move this Court for an Case 2:05-cv-02046-RRB-GGH Document 734 Filed 01/19/2010 Page 1 of 2
Transcript
1
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
Juli E. Farris (SBN 141716) KELLER ROHRBACK, L.L.P. 1201 Third Avenue, Suite 3200 Seattle, Washington 98101 Telephone: (206) 623-1900 Facsimile: (206) 623-3384 [email protected] Attorneys for Moving Plaintiffs Additional Counsel on Signature Page
UNITED STATES DISTRICT COURT EASTERN DISTRICT OF CALIFORNIA
SACRAMENTO DIVISION
GREGORY JOHNSON, et al., Plaintiffs, v. CLAIR R. COUTURIER, JR., et al., Defendants,
Order granting an award of attorneys’ fees, reimbursement of expenses and Plaintiff incentive
awards. Plaintiffs respectfully request that the Court consider this Motion in conjunction with
its consideration of approval of the Settlement. A Memorandum in support of this Motion is
filed herewith. DATED: January 19, 2010. KELLER ROHRBACK, P.L.C. By: /s/ Gary D. Greenwald Ron Kilgard Gary A. Sarko Gary D. Greenwald 3101 North Central Avenue, Suite 1400 Phoenix, Arizona 85012
DEVINE, MARKOVITS & SNYDER, LLP Terence J. Devine 52 Corporate Circle Albany, New York 12203
KELLER ROHRBACK, L.L.P. Juli E. Farris 1201 Third Avenue, Suite 3200 Seattle, Washington 98101
Attorneys for Plaintiffs Johnson, Rangel, Morrell, and Stanton
Attorneys for Plaintiff Rodwell
Case 2:05-cv-02046-RRB-GGH Document 734 Filed 01/19/2010 Page 2 of 2
Juli E. Farris (SBN 141716) KELLER ROHRBACK, L.L.P. 1201 Third Avenue, Suite 3200 Seattle, Washington 98101 Telephone: (206) 623-1900 Facsimile: (206) 623-3384 [email protected] Attorneys for Plaintiffs Johnson, Morrell, Rangel, and Stanton Additional Counsel on Signature Page
UNITED STATES DISTRICT COURT EASTERN DISTRICT OF CALIFORNIA
SACRAMENTO DIVISION
GREGORY JOHNSON, et al., Plaintiffs, v. CLAIR R. COUTURIER, JR., et al., Defendants,
6. Other Motion Practice ............................................................................... 7
C. Discovery .............................................................................................................. 7
D. Experts .................................................................................................................. 7
E. Settlement Negotiations ........................................................................................ 8
F. Plaintiffs‟ Counsel‟s Investment of Time and Money .......................................... 9
III. THE RELEVANT LAW................................................................................................. 10
A. The Common Fund Doctrine .............................................................................. 10
B. The Methods of Calculating Fees Under the Common Fund Doctrine............................................................................................................... 11
C. The Percentage Method Supports the Requested Fee Award. ............................ 12
D. The Requested Fee Award Is Consistent with the 25% Benchmark .................. 12
Case 2:05-cv-02046-RRB-GGH Document 734-2 Filed 01/19/2010 Page 2 of 40
ii
E. The Unusual Circumstances of this Case Warrant a Significant Upward Adjustment From the Benchmark. ........................................................ 13
2. This Litigation Was Extremely Risky..................................................... 19
3. Plaintiffs‟ Counsel Generated Benefits Beyond the Settlement Fund ...................................................................................... 21
4. The Financial Burden Of Litigating These Actions On A Contingency Basis Was Significant ........................................................ 25
5. No Objections Have Been Received. ...................................................... 26
6. Plaintiffs‟ Counsel Are Highly Skilled and Acted Efficiently ............................................................................................... 26
7. Attorneys‟ Fee Awards in Other Cases Support the Fee Requested Here. ...................................................................................... 28
F. The Lodestar Method Also Confirms the Reasonableness of the Requested Fee ..................................................................................................... 29
1. Plaintiffs‟ Counsels‟ Hours and Rates Are Reasonable .......................... 30
2. The Multiplier Is Reasonable .................................................................. 32
G. Plaintiffs‟ Counsel Should Be Reimbursed For Their Expenses And Plaintiffs Should Receive Incentive Awards .............................................. 32
H. Plaintiffs Should Receive Incentive Awards ...................................................... 33
IV. CONCLUSION ............................................................................................................... 34
Case 2:05-cv-02046-RRB-GGH Document 734-2 Filed 01/19/2010 Page 3 of 40
iii
Table of Authorities Cases
Antonopulos v. N. Am. Thoroughbreds, Inc., 1991 WL 427893 (S.D. Cal. May 6, 1991) ..................................................................................................................................... 30
Blum v. Stevenson, 465 U.S. 886 (1984) ..................................................................................... 12
Frank v. Eastman Kodak Co., 228 F.R.D. 174 (W.D.N.Y. 2005) .............................................. 30
Gaskill v. Gordon, 942 F. Supp. 382 (ND. Ill 1996) .................................................................. 30
In re Coordinated Pretrial Proceedings in Petroleum Prods. Antitrust Litig., 109 F.3d 602 (9th Cir. 1997) ....................................................................................................... 11
In re Corel Corp., Inc. Sec Litig. 293 F. Supp. 2d 484 (E.D. Pa 2003) ...................................... 30
In re Enron Corp. Sec. Derivative and “ERISA” Litig., 228 F.R.D. 541 (S.D. Tex. 2005) ..................................................................................................................................... 20
In re Gen. Instrument Sec. Litig., 209 F. Supp. 2d 423 (E.D. Pa 2001) ..................................... 30
In re Heritage Bond Litig., 2005 WL 1594403 (C.D. Cal. Jun. 10, 2005) ................................. 29
In re Med X-Ray Film Antitrust Litig., 1998 WL 661515 (E.D.N.Y, Aug 7, 1998) ................... 30
In re Mego Fin. Corp. Sec Litig., 213 F.3d 454 (9th Cir. 2000) .................................................. 29
In re Pac. Enters. Sec. Litig., 47 F.3d 373 (9th Cir. 1995) .......................................................... 29
In re Pub. Serv. Co. of N.M., 1992 WL 278452 (S.D. Cal. Jul. 28, 1992).................................. 30
In re Safety Components, Inc. Sec Litig., 166 F. Supp. 2d 72 (D.N.J. 2001) ...................... 30, 31
In re Xcel Energy Inc., Sec., Derivative, and ERISA Litig., 364 F. Supp. 2d 980 (D. Minn. 2005) .................................................................................................................... 37
Case 2:05-cv-02046-RRB-GGH Document 734-2 Filed 01/19/2010 Page 4 of 40
iv
Johnson v. Couturier, 572 F.3d 1067 (9th Cir. 2009) .................................................................. 21
Kolar v. Rite Aid, No. 01-1229, 2003 WL 1257272 (E.D. Pa. Mar. 11, 2003) .......................... 35
Linney v. Cellular Ala. P’ship, 1997 WL 450064 (N.D. Cal. Jul. 18, 1997 ......................... 29, 35
Mashburn v. Nat’l Healthcare, Inc., 684 F. Supp. 679 (M.D. Ala. 1988) .................................. 12
McPhail v. First Command Fin. Planning, Inc., 2009 WL 839841 (S.D. Cal. Mar. 30, 2009) ............................................................................................................................... 35
Mogck v. Unum Life Ins. Co. of Am., 289 F. Supp. 2d 1181 (S.D. Cal. 2003) ........................... 34
Pelletz v. Weyerhauser Co., 592 F. Supp. 2d 1322 (W.D. Wash. 2009) .................................... 36
Pennsylvania v. Delaware Valley Citizens’ Council for Clean Air, 478 U.S. 546 (1986) .................................................................................................................................... 12
Razilov v. Nationwide Mut. Ins. Co., No. 01-1466, 2006 WL 3312024 (D. Or. Nov. 13, 2006) ...................................................................................................................... 36
Case 2:05-cv-02046-RRB-GGH Document 734-2 Filed 01/19/2010 Page 5 of 40
1
INTRODUCTION
Plaintiffs Gregory Johnson, William Rodwell, Edward Rangel, Kelly Morrell, and
Darleen Stanton (collectively “Plaintiffs”) submit this Memorandum in support of their Motion
for Award of Attorneys‟ Fees, Expenses and Incentive Awards. Plaintiffs first describe the relief
obtained in this case and the fees, expenses and incentive awards being sought (section I), then
summarize the history of the litigation (section II), and finally discuss the law concerning the
awards of fees, expenses, and incentive awards in this Circuit (section III). This Memorandum is
supported by the Declaration of Lynn Sarko in Support of Motion for Final Approval of
Settlement and Plan of Allocation and Motion for Award of Attorneys‟ Fees, Expenses, and
Incentive Awards (“Sarko Decl.”), the Declaration of Gary D. Greenwald (“Greenwald Decl.”),
and the Declaration of Terence J. Devine (“Devine Decl.”), all filed this same date.
I. THE RELIEF OBTAINED AND THE AWARDS SOUGHT
Following years of hard-fought litigation, the parties have reached a Settlement1 that
provides for (1), the creation of a Settlement Fund into which there will be deposited (a) cash
payments of $8.8 million, (b) the net proceeds of the sale of the Palm Desert Property which,
pursuant to the Settlement Agreement, has been returned by Defendant Clair Couturier (“CRC”)
to TEOHC for the benefit of the ESOP, and (c) the federal income tax benefits CRC realizes as a
result of the return of the Palm Desert Property; and (2) the discharge of TEOHC‟s obligations
under a note (the “IRA Note”) to CRC‟s individual retirement account in the amount of
$1,534,248. We expect that deposits into the Settlement Fund (net of a penalty under § 502(l) of
ERISA payable to the United States Treasury), will amount to $11.6 million to $14.85 million.
In addition, because TEOHC is owned by the ESOP, the discharge of TEOHC‟s liability under
1 The terms of the settlement are set forth in a Settlement Agreement dated as of December 31, 2009 (the “Settlement Agreement”), a copy of which was filed with the Court at Dkt. 728. All capitalized terms used herein and not otherwise defined have the meanings assigned to them in the Settlement Agreement.
Case 2:05-cv-02046-RRB-GGH Document 734-2 Filed 01/19/2010 Page 6 of 40
2
the IRA Note confers a dollar-for-dollar benefit on the ESOP. Thus the total consideration under
the Settlement Agreement itself is anticipated to be between $13.1 million and $16.35 million.
In the course of the litigation, however, the efforts of Plaintiffs‟ Counsel conferred an
even greater economic benefit than is reflected in the four corners of the Settlement Agreement.
As is explained more fully below, during the course of the litigation, Plaintiffs sought and
obtained an injunction that prohibited the Defendants from using the TEOHC treasury to pay
their legal fees. The TEOHC assets preserved for the benefit of the ESOP as a result are
believed to be at least $4,500,000. But for this injunctive relief, TEOHC stock in the ESOP
would be worth that much less. Thus the total economic value conferred through the efforts of
Plaintiffs‟ Counsel‟s is in excess of $17.6 million to $20.85 million.2 This result was achieved
through the dedicated efforts of Plaintiffs and Plaintiffs‟ Counsel, and will result in substantial
recoveries by current and former participants in the ESOP.
In connection with the Settlement, Plaintiffs have moved for an award of attorneys‟ fees
and expenses pursuant to the common fund doctrine, together with incentive awards for
Plaintiffs. Plaintiffs seek an award of attorneys‟ fees equal to (a) 33-1/3% of the amounts
deposited into the Settlement Fund from time to time (net of the ERISA 502(l) penalty payable
with respect thereto and net of expense reimbursements awarded to Plaintiffs‟ Counsel), plus (b)
$450,000 payable with respect to Plaintiffs‟ Counsel‟s successful efforts to obtain injunctive
relief with respect to Defendants‟ claims for indemnity from TEOHC. As discussed below in
Section III.D., the total fee award sought will likely be 25% or less of the total value conferred
through the efforts of Plaintiffs Counsel. Plaintiffs also seek expense reimbursement of
2 Plaintiffs‟ Counsel conferred additional benefit through its assistance of TEOHC‟s counsel in the defense of TEOHC against claims asserted by Bruce Couturier. As discussed below, Bruce Couturier asserted an entitlement to over $4 million from TEOHC. In arbitration, he has been awarded approximately $332,000.
Case 2:05-cv-02046-RRB-GGH Document 734-2 Filed 01/19/2010 Page 7 of 40
3
$449,012 and incentive awards of $10,000 to each of Plaintiffs Johnson, Rodwell and Stanton,
and $5,000 each to Plaintiffs Rangell and Morrell.
II. THE LITIGATION
This litigation has been lengthy, complex and hard-fought. We summarize its major
features here.
A. The Complaints
The original Complaint was filed under Case No. 2:05-cv-02046 (the “Johnson Case”) on
October 11, 2005, by Plaintiffs Gregory Johnson, Edward Rangel, and William Rodwell, against
Defendants CRC, David R. Johanson (“Johanson”), and Robert Eddy (“Eddy”), and asserted
alleged claims for the losses suffered by the Noll ESOP and TEOHC ESOP as the result of
breaches of fiduciary duty and prohibited transactions under ERISA §§ 404, 405, 406, and 408.
Greenwald Decl., ¶ 4. The losses at issue resulted from CRC‟s excessive and unreasonable
incentive benefit agreements and buyout during the period from 2001 through 2004. Greenwald
Decl., ¶ 5. Plaintiff Kelly Morrell joined the litigation in 2006, and an Amended Complaint was
filed in December, 2006, which added Ms. Morrell as a plaintiff and elaborated on the ERISA
claims and added a state law derivative claim for breach of fiduciary duty by TEOHC‟s officers
and directors based upon the same facts. Greenwald Decl., ¶ 6. On June 20, 2007, Darleen
Stanton filed her Complaint under Case No. 2:07-cv-01208 against CRC, Johanson, and Eddy,
alleging the same claims as in the Johnson case for violation of ERISA and breach of fiduciary
duty under state law (the “Stanton Case”). Id. The Johnson and Stanton Cases have been
consolidated by this Court. Greenwald Decl., ¶ 7.
Case 2:05-cv-02046-RRB-GGH Document 734-2 Filed 01/19/2010 Page 8 of 40
4
B. Motion Practice
The parties engaged in significant motion practice in this litigation, summarized on
Exhibit 2 to the Sarko Decl.
1. Motions to Dismiss
Defendants filed six motions to dismiss. Sarko Decl., ¶ 5(b)(i). Each of these motions to
dismiss were denied, except for the motion of Johanson Berenson to compel arbitration of the
claims against it. Id.
2. Injunctive Relief
In August, 2008, we learned that CRC, Johanson and Eddy had instituted an arbitration
with TEOHC seeking a ruling that would entitle them to indemnity from TEOHC with respect to
their litigation expenses. Greenwald Decl., ¶ 72. Defendants‟ expenses had already exhausted a
$5 million insurance policy and a favorable ruling in the arbitration would have meant that
TEOHC would have immediately reimbursed Defendants for substantial litigation expenses and
would have continued to reimburse them thereafter on a current basis.3 Greenwald Decl., ¶¶ 68-
70.
While the arbitration did not directly address the merits of the claims asserted here, we
recognized that a ruling in Defendants‟ favor would be disastrous for the ESOP and its
participants. As the sole shareholder in TEOHC, the ESOP would have suffered the economic
consequences of the substantial dissipation of TEOHC‟s assets that would have resulted from
such a ruling. Moreover, backed by a TEOHC blank check, Defendants would have every
incentive to maximize the expense of this litigation and their incentive to settle would be
reduced. Further, we recognized that TEOHC‟s defense in the arbitration was infected by the
3 Plaintiffs‟ Counsel estimates that the litigation expenses to date for which Defendants would have been reimbursed by TEOHC with a favorable ruling in the arbitration would be in excess of $4,500,000.
Case 2:05-cv-02046-RRB-GGH Document 734-2 Filed 01/19/2010 Page 9 of 40
5
same type of conflicts of interest that infected the transactions at issue here, because Defendants
themselves had control and/or substantial influence over TEOHC. Greenwald Decl., ¶ 72.
As a result, to protect TEOHC and its shareholder the ESOP, on August 18, 2008,
Plaintiffs filed their Motion for a TRO and Preliminary Injunction to enjoin the arbitration
between Johanson, Eddy, and TEOHC relating to the claim for advancement of fees and
expenses for Defendants in the Johnson and Stanton cases, and to enjoin TEOHC from
advancing fees and expenses to Defendants prior to final disposition of the case. After further
proceedings, this Court signed the TRO on September 19, 2008 and the preliminary injunction
was issued on September 29, 2008 (“Preliminary Injunction I”). Greenwald Decl., ¶¶ 80-83.
On October 15, 2008, Plaintiffs again moved for a TRO and Preliminary Injunction, this
time to impose a constructive trust upon the assets which CRC received from TEOHC and the
ESOP as a result of the 2004 buyout transaction, and to enjoin the dissipation or transfer of the
assets during the pendency of this case. Greenwald Decl., ¶ 100. The Court granted the Motion
(Preliminary Injunction II) on October 24, 2008, and ordered CRC to provide Plaintiffs with an
accounting. Greenwald Decl. ¶ 101.
On October 13, 2009, in the Stanton Case, the Court issued its order (“Preliminary
Injunction III”) granting a third Motion for TRO and Preliminary Injunction, this one filed by
TEOHC and supported by Plaintiffs, enjoining TEOHC from advancing to CRC‟s brother, Bruce
Couturier, his legal fees and expenses in that case, pending final disposition. Greenwald Decl.,
¶ 43 (Dkt. 52).
Defendants appealed the granting of Preliminary Injunctions I and II to the Ninth Circuit
Court of Appeals. The Court of Appeals affirmed, finding for Plaintiffs on essentially all issues.
Case 2:05-cv-02046-RRB-GGH Document 734-2 Filed 01/19/2010 Page 10 of 40
6
Defendants‟ request for a rehearing at the Ninth Circuit en banc was denied. Greenwald Decl.,
¶¶ 84-89, 103-04.
3. Motions for Summary Judgment
Defendants filed a motion for summary judgment and motion for sanctions against
Plaintiffs in July and August 2006 respectively, both of which were denied. Greenwald Decl,
¶ 8. Plaintiffs filed their motion for partial summary judgment against Defendants in September
2, 2009. Greenwald Decl., ¶ 9. That motion, which sought judgment in excess of $25 million,
was fully briefed when the Settlement was reached. Greenwald Decl. ¶ 10.
4. Motion for Disqualification of Counsel
In February 2008, Defendants served upon Plaintiffs their motion to disqualify Plaintiffs‟
Counsel and for a protective order barring the use of any materials derived from information
obtained from Thomas McIntosh. Greenwald Decl., ¶ 12. Response to this motion required
extensive briefing and the retention of experts. In connection with the disqualification motion,
Defendants moved for discovery from Plaintiffs‟ experts (prior to filing their reply brief), which
Plaintiffs vigorously opposed. Defendants‟ motion for expert discovery and their
disqualification motion were denied in their entirety. Greenwald Decl. ¶ 13.
5. Privilege Motion
Among the motions filed by Plaintiffs was a critical motion to determine the application
of the attorney-client privilege as a result of Defendants withholding thousands of documents
and taking the position in depositions that certain questioning was barred by the attorney-client
privilege. Plaintiffs‟ Privilege Motion requested that the Court, inter alia, hold that the
crime/fraud exception was applicable to vitiate the protection of the attorney-client privilege.
Case 2:05-cv-02046-RRB-GGH Document 734-2 Filed 01/19/2010 Page 11 of 40
7
Greenwald Decl. ¶¶ 19-20. Plaintiffs‟ Privilege Motion was successful with respect to most of
the disputed documents and disputed communications. Greenwald Decl., ¶ 23.
6. Other Motion Practice
Exhibit 2 to the Sarko Decl. summarizes each of the many discovery and miscellaneous
motions filed here. Plaintiffs prevailed with respect to virtually all of the motions.
C. Discovery
As detailed in the Sarko Decl., at the time the Settlement was reached, fact discovery had
been substantially completed. A list of the 15 witnesses deposed by Plaintiffs and Defendants
over 21 days of deposition testimony is contained in Exhibit 3 to the Sarko Decl. In the course
of these depositions, over 500 documents were marked as exhibits. Sarko Decl., ¶ 5(d).
Document discovery was a major and continuing undertaking throughout the litigation,
with document productions commencing in March 2006 and extending into October 2009.
Plaintiffs estimate that over 200,000 documents were produced in the litigation, with over 20,000
documents being produced only after the filing of a motion to compel discovery. Exhibit 7 to the
Sarko Decl. contains a list of the parties providing production, the estimated date of production
and Bates range.
D. Experts
Initially, Plaintiffs engaged James Sillery as their executive compensation expert, but
were forced to replace him when a conflict of interest developed. Sarko Decl., ¶ 5(c). Plaintiffs
hired a nationally-recognized executive compensation consultant, Donald Delves of The Delves
Group, as their expert witness. Mr. Delves issued his final report on August 27, 2009. Id.
Plaintiffs also engaged Terence Griswold of Empire Valuation Consultants to provide
ESOP appraisal consulting services in the litigation with respect to the multiple appraisals issued
Case 2:05-cv-02046-RRB-GGH Document 734-2 Filed 01/19/2010 Page 12 of 40
8
by defense witnesses Dennis Locke (Moss Adams Advisory Services) and Matthew Donnelly
Plaintiffs also engaged three ethics experts to provide testimony in opposition to
Defendants‟ motion to disqualify Plaintiffs‟ Counsel. These experts included Geoffrey Hazard
and John Strait (engaged by Keller Rohrback for all Plaintiffs) Sarko Decl., ¶ 5(c), and Ellen
Pansky (engaged by Shayne Nichols for Plaintiff Rodwell) Devine Decl., Ex. D.
In connection with the complex tax issues related to Plaintiffs‟ motion for summary
judgment filed in October 2009 and in connection with the Settlement, Plaintiffs engaged tax
experts Robert J. Werner (an ERISA tax attorney), Brad Ostroff and Richard Onsager (tax
attorneys with experience in prosecuting tax refund claims and other pertinent tax issues). Sarko
Decl. ¶ 5(c).
E. Settlement Negotiations
The Parties engaged in three unsuccessful mediations before the mediation before Judge
Mueller that resulted in the Settlement. The first mediation was conducted in March, 2007,
before Judge Edward Stern in San Francisco. Greenwald Decl. ¶ 14. The second mediation was
an informal process conducted in the summer of 2008 by Jack Pfeffer, a TEOHC director
appointed in 2008. Mr. Pfeffer met separately with counsel for Plaintiffs (in June and August,
2008) and counsel for Defendants in an unsuccessful effort to reach settlement. Greenwald Decl.
¶ 15. The third mediation was conducted by Anthony Piazza in February, 2009. Greenwald
Decl. ¶ 16.
After the ruling by the Ninth Circuit Court of Appeals in Plaintiffs‟ favor and the
Plaintiffs‟ filing of their Motion for Partial Summary Judgment, the parties convened a two-day
mediation in Sacramento before Judge Mueller. Greenwald Decl., ¶ 17. The negotiations proved
Case 2:05-cv-02046-RRB-GGH Document 734-2 Filed 01/19/2010 Page 13 of 40
9
long and difficult, but a settlement was reached with the help of Judge Mueller. Greenwald
Decl. ¶ 18.
Even after a settlement was reached in principle, substantial and complex negotiations
were required to reach agreement on the details of the settlement. Greenwald Decl., ¶ 18. The
Settlement was complicated by tax and real estate issues relating primarily to the transfer of the
Palm Desert property and the assignment of the tax refund resulting from the return of the Palm
Desert property to TEOHC as critical components of value to be realized by the ESOP. Id.
F. Plaintiffs’ Counsel’s Investment of Time and Money
Plaintiffs‟ Counsel are the following firms:
Shayne & Greenwald (“S&G). S&G represented Plaintiffs Johnson, Rangell, Rodwell and Morrell through September, 2006, when the firm dissolved.
Keller Rohrback, LLP and Keller Rohrback, PLC (without distinction, “KR”). KR was retained by Plaintiffs Johnson, Rangell and Morrell as co-counsel with Gary Greenwald when S&G disbanded in September, 2006. KR was retained by Plaintiffs Darleen Stanton in March, 2007. Gary Greenwald joined KR in January, 2007. During the period from the dissolution of S&G until he joined KR, Gary Greenwald represented Plaintiffs Johnson, Rangell and Rodwell as co-counsel with KR through the firm Greenwald & Associates.
Devine, Markovits & Snyder, LLP (“DMS”). DMS has represented Plaintiff Rodwell as co-counsel with Shayne & Nicholls since September, 2007.
DeGraff, Foy, Kunz & Devine, LLP (now known as DeGraff, Foy & Kunz, LLP) (“DeGraff”). DeGraff represented Plaintiff Rodwell as co-counsel with Shayne & Nicholls from September, 2006 through August, 2007.
Shayne Nicholls, LLC (“SN”). SN has represented Plaintiff Rodwell (as co-counsel with DeGraff and DMS), since S&G dissolved in September, 2006.
The Righetti Law Firm (“Righetti”). Righetti served as local counsel for Plaintiffs Johnson, Rangell, Morrell and Rodwell until the dissolution of S&G, and has continued to serve as local counsel for Plaintiff Rodwell since that time.
Case 2:05-cv-02046-RRB-GGH Document 734-2 Filed 01/19/2010 Page 14 of 40
10
Plaintiffs‟ Counsel expended a substantial amount of time and money on a contingent
basis to prosecute this litigation. As of January 15, 2010, Plaintiffs‟ Counsel has already devoted
more than 10,000 professional hours to the litigation, representing $4,825,063 in dollars-times-
hours “lodestar,” and has incurred $449,012 in out-of-pocket expenses. Sarko Decl. ¶¶ 4-16 and
Exs. 5-6 attached thereto; Devine Decl. Exs. A-D; Greenwald Decl., Ex. 1-3.4 Of this time,
approximately 600 professional hours, representing a lodestar of approximately $310,000, were
devoted to the injunction proceedings and related appeal. Id.
Plaintiffs‟ Counsel will continue to devote additional attorney hours in connection with
final approval of the Settlement, including preparation for and appearance at the Fairness
Hearing. It is anticipated that significant efforts will be required of Plaintiffs‟ Counsel in
connection with on-going administration of the Settlement, including monitoring and otherwise
participating in TEOHC‟s efforts to sell the Palm Desert Property and Mr. Couturier‟s efforts to
realize tax benefits from the return of the Palm Desert Property. Sarko Decl. ¶ 17-18.
III. THE RELEVANT LAW
A. The Common Fund Doctrine
When litigation confers a “substantial benefit” upon a group of beneficiaries, attorneys
are entitled to recover attorneys‟ fees from the fund resulting from the litigation. See, e.g.,
Fischel v. Equitable Life Ins. Soc’y of the U.S., 307 F.3d 997, 1006 (9th Cir. 2002). The doctrine
is “„based on the equitable notion that those who have benefited from litigation should share in
4 As set forth in the Greenwald and Devine Declarations, the foregoing lodestar figures include time invested by S&G and SN, but only to the extent that Greenwald and Devine believe the time invested by those firms can be said to have contributed toward the prosecution of the litigation or the Settlement. Greenwald and Devine have carefully reviewed the time records of S&G and SN, and made their assessments of the S&G and SN time based thereon and based on their personal familiarity with all aspects of the litigation. Stanley Shayne, a partner at S&G and SN has informed KR and DMS that he believes that the lodestar figures for S&G and SN included in the Greenwald and Devine Declarations are understated and inappropriately exclude certain time and value that was invested by those firms.
Case 2:05-cv-02046-RRB-GGH Document 734-2 Filed 01/19/2010 Page 15 of 40
11
its costs.‟” In re Coordinated Pretrial Proceedings in Petroleum Prods. Antitrust Litig., 109
The goal of the common fund doctrine is to reasonably compensate counsel for their efforts in
creating the common fund. Paul, Johnson, Alston & Hunt v. Graulty, 886 F.2d 268, 271-72 (9th
Cir. 1989).
The common fund doctrine plainly applies here. The ultimate beneficiaries of the
litigation are the participants and beneficiaries in the ESOP. They will benefit both from the
Settlement Fund created under the Settlement and through the preservation of TEOHC‟s assets
that resulted from the injunctive relief obtained by Plaintiffs‟ Counsel. Thus, payment of an
attorney‟s fee award from the Settlement Fund is fair and equitable. See, e.g., Graulty, 886 F.2d,
271 (common fund award appropriate where beneficiaries of litigation can be identified, benefits
of litigation can be traced and fee can be shifted “with some exactitude to those benefitting.”).
B. The Methods of Calculating Fees Under the Common Fund Doctrine
There are two methods of calculating the fee award under the common fund doctrine: the
percentage-of-the-fund method and the lodestar method. In the percentage method, the attorneys
are awarded a reasonable percentage of the common fund. Graulty, 886 F.2d. at 272. Under the
lodestar method, the district court multiplies the attorneys‟ reasonable number of hours by the
attorneys‟ reasonable rate. Pennsylvania v. Delaware Valley Citizens’ Council for Clean Air,
478 U.S. 546, 565 (1986). The district court may, and in appropriate circumstances must,
increase the lodestar calculation by using an additional “multiplier” to arrive at a reasonable fee.
Blum v. Stenson, 465 U.S. 886, 888 (1984); Fischel v. Equitable Life Ins. Soc’y of the U.S., 307
F.3d 997, 1008 (9th Cir. 2002). Both of these methods support the fee requested here.
Case 2:05-cv-02046-RRB-GGH Document 734-2 Filed 01/19/2010 Page 16 of 40
12
C. The Percentage Method Supports the Requested Fee Award.
With respect to the percentage method, the Ninth Circuit has adopted a 25%
“benchmark” for attorneys‟ fee awards in cases with a common fund recovery. See e.g., Graulty,
886 F.2d at 272 (citing with approval, the adoption of a 25% benchmark in Mashburn v. Nat’l
Healthcare, Inc., 684 F. Supp. 679, 692 (M.D. Ala. 1988); Fischel, 307 F.3d at 1006; Vizcaino v.
Microsoft Corp., 290 F.3d 1043, 1047 (9th Cir. 2002) This benchmark “can be adjusted upward
or downward to account for any unusual circumstances….” Graulty, 886 F.2d at 272-73.
Application of these principles strongly supports the award requested here. When the
total economic value conferred by the efforts of Plaintiffs‟ Counsel is considered, the fee award
requested is consistent with the 25% benchmark. Moreover, even if the Court were to focus
solely on the four corners of the Settlement Agreement, so that the fee requested is in excess of
25% of the Settlement Fund, the unusual circumstances of these actions warrant an upward
adjustment to the benchmark.
D. The Requested Fee Award Is Consistent with the 25% Benchmark
Plaintiffs‟ Counsels‟ efforts have conferred economic benefit on the ESOP and its
participants consisting of the following:
(i) Funds to be deposited into the Settlement Fund. There are three components here: $8.8 million to be deposited initially (from which an ERISA § 502(l) penalty of $800,000 will be paid); the net proceeds of the sale of the Palm Desert Property, which Plaintiffs‟ Counsel estimates will be between $4 - $5.225 million5 (an ERISA § 502(l) penalty of 1/11th of these proceeds will be paid, reducing the net amount to $3.6 - $4.75 million); and the federal income tax benefits realized by CRC resulting from the return of the Palm Desert Property (this component will range from zero to $2.1 million). The total funds to be deposited, net of the
5 TEOHC acquired the Palm Desert Property in 2004 at a cost of approximately $6.9 million. Even though under current real estate market conditions the sale price of the Palm Desert Property is likely to be $5.5 million or less, Plaintiffs‟ Counsels‟ efforts have restored to TEOHC for the benefit of the ESOP an asset with a cost basis of close to $6.9 million.
Case 2:05-cv-02046-RRB-GGH Document 734-2 Filed 01/19/2010 Page 17 of 40
13
ERISA § 502(l) penalties, are thus expected to range from $11.6 million to $14.85 million.
(ii) Discharge of the IRA Note. Absent the litigation and the discharge resulting from the Settlement, TEOHC would have been obligated to pay CRC‟s IRA $1,534,248 under the IRA Note.
(iii) Preservation of TEOHC‟s assets from indemnity claims. Absent the injunctive
relief obtained by Plaintiffs‟ Counsel with respect to the indemnity sought by Defendants from TEOHC, TEOHC‟s assets would have been significantly depleted by those indemnity claims. Plaintiffs‟ Counsel estimates that the savings to TEOHC to date are at least $4.5 million.
The total economic benefits conferred by Plaintiffs‟ Counsels‟ efforts are thus estimated
to range from approximately $17.63 million to $20.88 million.6 The fee award requested, is 33-
1/3% of the deposits into the Settlement Fund (net of the ERISA § 502(l) penalties and net of the
approximately $440,000 in expenses for which Plaintiffs‟ Counsel seek reimbursement), plus
$450,000. This request would result in a total fee of approximately $4.17 million to $5.25
million. At the lower end of the range, $4.17 million is approximately 23.7% of $17.63 million;
at the upper end, $5.25 million is approximately 25.14% of $20.88 million. Thus, the fee award
sought is consistent with the 25% benchmark established by the Ninth Circuit.
E. The Unusual Circumstances of this Case Warrant a Significant Upward Adjustment From the Benchmark.
Moreover, even if one focuses only on the four corners of the Settlement Agreement, so
that the fee is in excess of 25%, the unusual circumstances of these actions warrant an upward
adjustment to the benchmark.7 In Vizcaino, the Ninth Circuit found that an upward adjustment
from the benchmark, in that case to 28%, was reasonable because of: (1) the exceptional results
6 In addition, Plaintiffs‟ Counsel have assisted TEOHC‟s counsel in the defense of an arbitration proceeding brought by CRC‟s brother, Bruce Couturier, seeking over $4 million in compensation from TEOHC. At the conclusion of the arbitration, Bruce Couturier was awarded only $332,000, resulting in a substantial savings to TEOHC.
7 If the preservation of TEOHC‟s assets resulting from injunctive relief is disregarded, the economic benefit conferred is $13.1 to 16.4 million; the requested fee would equal approximately 32% of these amounts.
Case 2:05-cv-02046-RRB-GGH Document 734-2 Filed 01/19/2010 Page 18 of 40
14
achieved for the class; (2) the extreme riskiness of the litigation; (3) the benefits generated
beyond the cash settlement fund; and (4) the financial burdens of the contingent fee
representation. Id. at 1048-50. The Manual for Complex Litigation recommends consideration
of three additional factors: (1) any objections by class members, (2) the skill and efficiency of
the attorneys involved, and (3) attorneys‟ fee awards in other cases. Manual for Complex
Litigation (Fourth) § 14.121 at 257-58.
We address these seven factors in turn below. However, we begin with an aspect of the
case not fully compassed by any of the seven factors, but relevant to all of them, namely the
extreme contentiousness of this case and the efforts Plaintiffs‟ Counsel‟s had to make, and did
make, simply to keep the case moving forward.
Throughout the pendency of the litigation (from October 2005 until January 2010),
counsel for Defendants contested virtually every discovery matter in this highly complex and
contentious ERISA case. This resulted in an extraordinary level of motion practice. In fact,
Plaintiffs have counted 45 separate motions filed in this case.
Exhibit 2 to the Sarko Decl. is a list of all significant motions filed by Defendants and
Plaintiffs in the District Court and the Ninth Circuit Court of Appeals. Initially, Defendants
attempted to seek dismissal of the case through the filing of six separate motions to dismiss and
one motion for summary judgment (and in an absurd excess of advocacy, one for sanctions!).
When these efforts to dismiss the case failed, Defendants threw caution to the winds, essentially
declared war and filed their motion to disqualify each attorney and law firm representing
Plaintiffs (“Disqualification Motion”). While Plaintiffs believed the Disqualification Motion to
be preposterous, they had no choice but to engage ethics experts to counter the charges and spent
considerable time and effort in preparing their memorandum in opposition. Like Defendants‟
Case 2:05-cv-02046-RRB-GGH Document 734-2 Filed 01/19/2010 Page 19 of 40
15
prior motions, Defendants‟ Disqualification Motion was denied, after which the parties engaged
in intense discovery and deposition practice (including efforts by defense counsel to depose Mr.
Greenwald in an apparent effort to force a disqualification) to ready the case for trial.
The discovery process was anything but normal. Defendants contested everything from
the length of a deposition and whether a deposition could be taken of a witness who agreed for
cash consideration not to testify regarding CRC‟s wrongful conduct, to whether Defendants‟
overly broad interpretation of document requests and depositions impinged upon the attorney-
client privilege. In addition, counsel for Defendants regularly interfered with Plaintiffs‟
Counsels‟ questioning at the deposition of the individual Defendants and certain other key
witnesses, which resulted in Plaintiffs filing a motion for sanctions against defense counsel and
motions to extend the time limits to permit completion of multiple depositions.
Plaintiffs‟ level of success in the motion practice has been exceptional. This Court or the
Magistrate Judge ruled against Defendants with respect to virtually every motion filed by
Plaintiffs and/or Defendants. Among the many critical rulings, this Court denied all of
Defendants‟ motions to dismiss, motion for summary judgment, Defendants‟ Disqualification
Motion, and each of Defendants‟ motions for extension of the trial dates, which was scheduled to
commence February 1, 2010. Similarly, Magistrate Judge Hollows ruled against Defendants
with respect to CRC‟s motion to compel discovery from Plaintiffs‟ Counsel.
Magistrate Judge Mueller and Magistrate Judge Hollows ruled in favor of Plaintiffs on
their motions for sanctions, on each of Plaintiffs‟ motions to extend the time limits for
depositions of witnesses and further even granted Plaintiffs‟ Privilege Motion by holding the
crime-fraud exception applicable to most of the disputed documents and disputed
communications.
Case 2:05-cv-02046-RRB-GGH Document 734-2 Filed 01/19/2010 Page 20 of 40
16
Of particular significance are the efforts of Plaintiffs‟ Counsel in securing Preliminary
Injunctions I and II to prevent the individual Defendants from receiving from TEOHC
advancement of fees and expenses during the pendency of the lawsuit under various
indemnification agreements and to protect the constructive assets from dissipation by CRC
during the pendency of the case. These motions were highly contested and resulted in extensive
briefs and related filings both in this Court and before the Ninth Circuit.
Both of these important motions were granted, providing critical protection of Plan assets
and the constructive trust assets pending the outcome of the litigation. Without such protections,
it is unlikely that Plaintiffs would ever have succeeded in reaching a settlement and achieved the
benefits for the ESOP. Moreover, without the injunctions, it is likely that a substantial amount of
the funds (if not all) resulting from the Gibraltar transaction would have been exhausted in
paying for the defense of the very individuals accused of breaching their fiduciary duties.
Even after Plaintiffs prevailed on Preliminary Injunctions I and II, Defendants contested
the rulings and filed an appeal to the Ninth Circuit Court of Appeals. In addition, Defendants
filed multiple motions in this Court and in the Ninth Circuit to stay trial court proceedings
pending a ruling on appeal. Plaintiffs‟ Counsel worked feverishly and defeated each and every
motion to stay. Significantly, Plaintiffs‟ remarkable efforts led to a landmark appellate decision
by the Ninth Circuit which overruled every defense argument and decided each critical legal
issue on the merits in Plaintiffs‟ favor. The Ninth Circuit‟s Opinion in this case has received
widespread attention in the legal community, and was reported in detailed articles in West
Publishing‟s ERISA Litigation Reporter and BNA‟s Pension & Benefits Reporter. The motion
practice in this case has been extraordinary, and the results achieved by Plaintiffs even more
extraordinary.
Case 2:05-cv-02046-RRB-GGH Document 734-2 Filed 01/19/2010 Page 21 of 40
17
Similarly, the commitment of Plaintiffs‟ Counsel is reflected in the depositions taken by
Plaintiffs and their use of experts, where necessary, all of which required substantial time
commitment and advancement of costs. See Exhibit 3 to the Sarko Decl., listing the depositions
taken in this litigation. Plaintiffs‟ Counsel traveled at great cost across the United States to
conduct depositions from Philadelphia to California. These depositions included the appraisers
(Dennis Locke and Matthew Donnelly), the compensation consultant (Anthony Mathews),
attorneys (Thomas McIntosh and David Johanson), the accountant (James Roorda), the
individual who engaged in negotiations to purchase Noll Manufacturing (David Fenkell of
Alliance Holdings), the deal broker (Dan Mytels), and many others. These depositions were all
document intensive and required an extremely high level of deposition preparation and document
review.
The case also required experts at every turn, from legal ethics experts for the
Disqualification Motion, a compensation consultant for the preparation of Plaintiffs‟ expert
report, appraisal consultants and ERISA and tax experts for assistance in connection with
Plaintiffs‟ motion for summary judgment filed in 2009 and negotiation of the settlement
agreement executed by the parties.
In addition, Plaintiffs‟ Counsel prepared and filed a extensive motion for partial summary
judgment that was pending before the Court at the time settlement was reached. Underscoring
the intensity of this litigation, Plaintiffs‟ Counsel‟s efforts in briefing this motion for partial
summary judgment included replying to Defendants‟ Responses – a massive set of documents
that included hundreds of Declarations, exhibits, and evidentiary motions.
Plaintiffs‟ Counsel made an extraordinary commitment in this complex litigation and
achieved remarkable results throughout the case which were instrumental in the end result – a
Case 2:05-cv-02046-RRB-GGH Document 734-2 Filed 01/19/2010 Page 22 of 40
18
remarkable settlement. These efforts and commitment are deserving of an upward adjustment of
the benchmark to 33-1/3%. Moreover, the highly unusual but critically important actions taken
by Plaintiffs‟ Counsel in securing injunctive relief with respect to the arbitration proceedings
warrant an additional award of attorneys‟ fees. These efforts preserved at least $4,500,000 in
TEOHC assets which benefit the ESOP and its participants on a dollar-for-dollar basis. Thus,
the requested fee of $450,000 is less than 10% of the financial benefit conferred on the ESOP by
virtue of Plaintiffs‟ Counsels‟ efforts. We now turn specifically to the seven factors.
The Settlement is an exceptional result that will confer substantial economic benefit upon
the ESOP and its participants. Net of the attorneys‟ fees and expenses and Plaintiff incentive
awards sought hereby, the settlement fund to be distributed to current and former ESOP
participants would be between approximately $6.9 million to $9.2 million. Plaintiffs‟ counsel
estimates that this will result in an average of $270,000 to $360,000 to be allocated to the ESOP
of accounts of each of the ESOP‟s 23 current participants. In addition, the discharge of the IRA
Note as part of the Settlement will make an additional $1,534,248 available for distribution,
which is approximately an additional approximately $66,700 per current participant. Plaintiffs
submit that this Settlement achieves an exceptional outcome for the ESOP and its participants.
As the Court may recall, CRC received benefits totaling approximately $34 million from
the 2004 transaction, including $26 million in cash transferred into an IRA in 2004 and 2005, the
Palm Desert Property, and $2.7 million to pay CRC‟s taxes on the Palm Desert Property and the
Bentley automobile, inter alia. Greenwald Decl., ¶ 32. A small fraction of those benefits were
proper compensation to CRC for the repurchase of his ESOP shares and his deferred
compensation due and owing under a Compensation Continuation Agreement, which obligations
Case 2:05-cv-02046-RRB-GGH Document 734-2 Filed 01/19/2010 Page 23 of 40
19
were created prior to any of the claims at issue. Id. In addition, there was always risk that a
portion of CRC‟s options and value enhancement incentives would be viewed as reasonable,
thereby reducing the ESOP‟s recoverable damages. Id.
While Plaintiffs always believed that Plaintiffs would obtain a judgment in the range of
$25 million or more, the depressed stock market and economy since 2006 rendered collection of
that amount highly unlikely. Greenwald Decl., ¶ 33. Continuation of the lawsuit to trial would
have further dissipated the assets in the IRA by defense costs and CRC‟s living expenses with
respect to both his Gig Harbor home in Washington and the Palm Desert Property. Id.
Plaintiffs‟ Counsel were concerned that these liquid assets could easily have been further
diminished by $3-5 million by the time a trial was completed and judgment was entered.
Greenwald Decl. ¶ 34.
In addition, Plaintiffs recognized the risk that the Internal Revenue Service could easily
take the position that any amounts in the IRA were taxable to CRC as of 2004, on the ground that
“roll-over treatment” claimed by CRC was not appropriate. Greenwald Decl., ¶ 35. Had that
occurred, tax, penalties and interest could have easily exceeded the current value of the
constructive trust assets. Id. Such a result would have further depleted any hopes for collection.
2. This Litigation Was Extremely Risky
ERISA cases such as this one contain a number of risks, in part because ERISA is a
specialized and complex area of the law, which is still being developed. In re Enron Corp. Sec.
Derivative and “ERISA” Litig., 228 F.R.D. 541, 565 (S.D. Tex. 2005) (finding that the
“complexity, expense, and likely duration of the litigation . . . are self-evident and exceptional.”
This is particularly true in this case where complex and difficult issues abound.
Among the many complex legal issues were the following:
Case 2:05-cv-02046-RRB-GGH Document 734-2 Filed 01/19/2010 Page 24 of 40
20
1. Whether the setting of executive compensation was a business decision not
subject to ERISA;
2. Whether the Court could grant a preliminary injunction to enjoin TEOHC
from advancing Defendants‟ defense costs under the law and ERISA where
Defendants served dual roles as corporate directors and ESOP trustees and
were accused of conduct which allegedly breached both state law and ERISA
fiduciary law; and
3. Whether the Court could impose an asset freeze upon CRC to prevent the
likely dissipation of constructive trust assets prior to a final hearing on the
merits.
Each of these issues and many others were difficult legal issues involving significant
conflicts among the circuits and district courts regarding the interpretation and application of
ERISA. Each of these critical issues was determined in favor of Plaintiffs and against
Defendants by this Court in multiple motions. The District Court‟s determination was affirmed
by the Ninth Circuit Court of Appeals on appeal. Johnson v. Couturier, 572 F.3d 1067 (9th Cir.
2009).
Of course, until the ruling of the Ninth Circuit in July 2009, the risk of reversal existed.
Even after the ruling by the Court of Appeals, Defendants filed a request for reconsideration en
banc. Thus the risk continued throughout the four years and three months of this difficult
litigation.
An even greater risk was the dissipation of the constructive trust assets before judgment
could be obtained. Since none of the Defendants had any substantial assets besides the
constructive trust assets, all of Counsels‟ dedication and hard work would be for nothing unless
Case 2:05-cv-02046-RRB-GGH Document 734-2 Filed 01/19/2010 Page 25 of 40
21
the case was settled or judgment obtained before the dissipation of existing assets. This risk was
exacerbated by the disastrous economy after 2006, the enormous legal fees paid to CRC‟s
counsel, and CRC‟s lavish lifestyle which caused the rapid dissipation of the assets available for
recovery here. Greenwald Decl., ¶ 33-34.
Further, Plaintiffs‟ Counsel understood the tax risks associated with CRC‟s IRA account.
This presented the risk that the Internal Revenue Service would attempt to tax the entire payment
into the IRA as of 2004 or would attempt to tax CRC on any money paid from the IRA to
Plaintiffs, thereby further dissipating the funds or frustrating Plaintiffs‟ recovery. Greenwald
Decl., ¶ 35.
3. Plaintiffs’ Counsel Generated Benefits Beyond the Settlement Fund
Even though Plaintiffs‟ counsel filed this lawsuit to recover damages to the ESOP arising
from the 2004 transaction and CRC‟s incentive benefit agreements granted during 2001 - 2003, it
was discovered during the litigation that two separate arbitration proceedings were being
conducted without notice to the ESOP that jeopardized the Plan assets resulting from the sale of
TEOHC assets in April 2007 to Gibraltar Industries. Greenwald Decl., ¶¶ 37, 72, At the time of
the asset sale, ESOP participants had two separate sources for distribution of Plan assets: (1) the
net proceeds from the Gibraltar purchase after payment of creditors, estimated at $15-20 million
(approximately $12 million of which is still held by TEOHC), and (2) the proceeds of a recovery
in this lawsuit.
In August, 2008, Plaintiffs‟ Counsel became aware that Defendants were seeking through
a confidential arbitration proceeding payment of their ongoing defense expenses by TEOHC
under a series of indemnification agreements between TEOHC and the individual Defendants,
and they immediately sought to intervene in the arbitration. Greenwald Decl., ¶ 72. Efforts at
Case 2:05-cv-02046-RRB-GGH Document 734-2 Filed 01/19/2010 Page 26 of 40
22
intervention were denied, and counsel became aware that the arbitration decision was going to be
rendered without a hearing, on submission, in the third week of September 2008.8 Greenwald
Decl. ¶ 73.
TEOHC still held approximately $12 million in cash from the Gibraltar transaction.
Counsel believed that if Defendants were given access to that money, the entire amount would
ultimately be exhausted by the payment of Defendants‟ litigation expenses. Greenwald Decl., ¶
74. Although the funds held in TEOHC were not a part of the claims asserted in this action, they
did constitute funds that would have been paid to the ESOP participants but for the pendency of
this litigation. Use of the funds for defense costs would not only further damage the ESOP, it
would also in all likelihood prolong the litigation. If the Defendants were expending TEOHC‟s
money to defend themselves, Defendants would have no incentive to accept responsibility and
settle the litigation. Given these facts, Counsel undertook the responsibility of protecting
TEOHC and the ESOP. Greenwald Decl., ¶ 75-80.
To prevent the use of corporate funds for indemnity, an order to show cause was brought
seeking a temporary restraining order and a preliminary injunction enjoining the payment sought
under the indemnification agreements. The order to show cause was presented in Sacramento on
September 18, 2009. The Order granting the Order to Show Cause and Temporary Restraining
Order was signed on September 19, 2008. The order granting Plaintiffs‟ request for a
Preliminary Injunction was granted on September 29, 2008.9 Greenwald Decl., ¶¶ 80-83.
8 In fact the arbitration decision authorized the indemnification payments the day before the issuance of the temporary restraining order, but such payment was enjoined as a direct result of the efforts of Plaintiffs‟ Counsel.
9 Plaintiffs subsequently requested and were granted a Preliminary Injunction against Defendant CRC enjoining him with respect to the use of the “Constructive Trust Assets.” Those assets were subject to Plaintiffs‟ claim in this action. They serve as a source of the funding of the Settlement, but the injunction did not result in payment or protection of assets not covered by the claim. Thus, there is no separate application for fees with respect to that injunction. Services resulting in the injunction are covered by the 33-1/3% fee award requested.
Case 2:05-cv-02046-RRB-GGH Document 734-2 Filed 01/19/2010 Page 27 of 40
23
Defendants appealed the granting of the injunction to the Ninth Circuit Court of Appeals.
The appeal resulted in amicus briefs being submitted by a group of banks and trust companies on
behalf of Defendants and by the Department of Labor on behalf of Plaintiffs. After extensive
briefing, the appeal was argued in San Francisco on May 7, 2009. By a lengthy decision issued
on July 27, 2009, the Ninth Circuit affirmed the order granting the injunction, upholding the
position asserted by Plaintiffs on almost every issue. The Court specifically found that Plaintiffs
were likely to succeed in the action and that the indemnification agreements violated ERISA.
Because the proceeds of the Gibraltar transaction were not covered by the claims asserted in the
actions and the assets protected are not part of the common fund paid under the Settlement,
Counsel should be compensated for assuming the responsibility of protecting the ESOP.
The issues involved in the request of injunction and the appeal were extremely complex,
as evidenced by the fact that amicus briefs were submitted on behalf of both parties. They
involved not only ERISA and state law issues, but dealt with important public policy
considerations. Moreover, the injunction and appeal were aggressively pursued by Plaintiffs‟
Counsel parallel to the efforts of Counsel to move the action toward a prompt trial date.
The granting of the injunction and the successful defense of the appeal resulted in very
substantial benefits to the ESOP. It prevented the use of corporate funds for an improper
indemnification. Perhaps as important, it caused the breaching parties for the first time to bear
the economic burden of defense. It is likely that this was a precipitating factor leading to the
Settlement. While the exact amount of the benefit to the ESOP resulting from the injunction
is difficult to quantify, several facts are clear. Defense costs had already exhausted a $5 million
insurance policy as of mid 2008. TEOHC was holding approximately $12 million, all of which
was potentially subject to claims of indemnification. Plaintiffs‟ Counsel believes that to date,
Case 2:05-cv-02046-RRB-GGH Document 734-2 Filed 01/19/2010 Page 28 of 40
24
had the injunction not been entered, the indemnity paid to Defendants would be in excess of
$4,500,000. Greenwald Decl., ¶ 99.
Plaintiffs‟ Counsel not only enjoined the payment of defense costs, as part of the
Settlement the individual Defendants agreed to waive any claims they had against TEOHC.
Further, CRC agreed to eliminate the indebtedness of $ 1,534,248.00 million from TEOHC as
part of the Settlement. These concessions substantially benefit the ESOP.
Counsel provided similar protection when they learned that CRC‟s brother, Bruce
Couturier, had filed an arbitration with TEOHC (“Bruce Couturier arbitration”) and was
attempting to collect over $4 million from the Gibraltar proceeds to pay Bruce Couturier for
excessive compensation and options promised by CRC to encourage Bruce Couturier as a
TEOHC Director and/or as an ESOP participant to approve certain of the payments to CRC from
the 2004 transaction and not to object to CRC‟s buyout. Greenwald Decl., ¶ 37. After Plaintiffs‟
Counsel unsuccessfully tried to intervene in the Bruce Couturier arbitration, Plaintiffs‟ Counsel
filed an ERISA lawsuit against Bruce Couturier styled Darleen Stanton and Kelly Morrell v.
Bruce P. Couturier, Case No. 2:09-cv-00519 (“Bruce Couturier District Court Action”),
currently pending in this Court. Greenwald Decl., ¶ 38. Bruce Couturier‟s motion to dismiss the
complaint was recently denied. Greenwald Decl., ¶ 39.
This action was filed to protect the interests of the ESOP by reason of ERISA violations
including breach of fiduciary duty and engaging in a prohibited transaction. Greenwald Decl.,
¶ 40. Plaintiffs‟ Counsel also worked closely with TEOHC counsel (Cynthia Larsen) in
connection with the arbitration hearing which resulted in a decision in favor of Bruce Couturier
for the amount of only $332,660.96 in cash or 4,296.28 shares of TEOHC stock. Greenwald
Decl., ¶ 41. Bruce Couturier has other claims in arbitration which have yet to be decided. Id.
Case 2:05-cv-02046-RRB-GGH Document 734-2 Filed 01/19/2010 Page 29 of 40
25
Plaintiffs intend to continue their representation to protect the Gibraltar proceeds from Bruce
Couturier‟s claims and, if necessary, will vigorously pursue this litigation for the benefit of the
ESOP and protection of Plan assets. Greenwald Decl., ¶ 42. Plaintiffs, as well as TEOHC, also
were successful in obtaining a preliminary injunction from this Court enjoining Bruce Couturier
from obtaining advancement of his legal fees and expenses in the Bruce Couturier District Court
Action. Greenwald Decl., ¶ 43.
Among each of these important benefits beyond the Settlement Fund, it must be
recognized that settlement of this case also provides the ESOP with the benefit of a substantial
financial recovery without the delay inherent in continued litigation. This is particularly
important here given the composition of the class of participants, many of whom are retirees or
persons out of work and thus undoubtedly suffering significant financial hardships in the
economic turmoil of 2006 through the present. Prompt distribution of a significant portion of the
recovery in this case will provide a meaningful benefit beyond the dollar amount recovered. It
will provide liquidity for ESOP participants in immediate need of the funds and reduced
financial anxiety for many others.
4. The Financial Burden Of Litigating These Actions On A Contingency Basis Was Significant
Plaintiffs‟ Counsel accepted this matter on a contingent basis with the enormous risk that
counsel would receive no fee or expense reimbursement. Greenwald Decl., ¶ 47. This
investment was substantial and involved several law firms.
The Sarko, Greenwald, and Devine Declarations. summarize the professional time
expended by Plaintiffs‟ Counsel that contributed to the extraordinary result obtained here, as well
as the substantial expenses incurred by Plaintiffs‟ Counsel. Over 10,000 of professional time
have been invested, along with over $440,000 in out of pocket expenses, all with no assurance of
Case 2:05-cv-02046-RRB-GGH Document 734-2 Filed 01/19/2010 Page 30 of 40
26
any payment whatsoever. The burdens of carrying this risky case for more than four years and
three months was extraordinary and demonstrates the commitment of Plaintiffs‟ Counsel to
litigate this case to trial and beyond to achieve a fair outcome for the ESOP participants.
5. No Objections Have Been Received.
To date no objections to the requested fee have been received from ESOP participants or
beneficiaries; however, CRC‟s brother, Bruce Couturier, has filed a notice of his intent to file an
objection to the settlement. Moreover, neither TEOHC, the ESOP nor the Department of Labor
opposes the requested fee award.
6. Plaintiffs’ Counsel Are Highly Skilled and Acted Efficiently
Plaintiffs‟ Counsel is or has been lead or co-lead counsel in important ERISA breach of
fiduciary duty cases throughout the nation. For example, Keller Rohrback is lead or co-lead
counsel in the Merrill Lynch, Fremont General Corp., IndyMac Bank, Washington Mutual, and
Bear Stearns ERISA fiduciary breach class actions and served as lead or co-lead counsel in the
Enron, WorldCom, and Global Crossing ERISA fiduciary breach class actions. Keller Rohrback
has developed both an expertise and a facility with maneuvering through the labyrinth of ERISA
law effectively and efficiently, as demonstrated by the results in this case and the many other
cases of the same type successfully litigated by Plaintiffs‟ Counsel. See Keller Rohrback firm
resume, Sarko Decl. ¶¶ 6-8, Ex. 4.
Plaintiffs‟ lead trial counsel, Gary D. Greenwald, has practiced for over 18 years in the
highly specialized field of ERISA law, with almost 16 of those years handling litigation
involving employee stock ownership plans. Greenwald Decl., ¶ 50. Mr. Greenwald has served
as lead counsel for ESOP participants in litigation involving breach of fiduciary and prohibited
transactions in district courts in the states of New York, New Jersey, Ohio, Illinois, Missouri,
Case 2:05-cv-02046-RRB-GGH Document 734-2 Filed 01/19/2010 Page 31 of 40
27
Oregon, and California. Greenwald Decl., ¶ 51. He has personally tried five ESOP cases to
conclusion and obtained judgment for the ESOP participants in four of the cases: Henry v.
Champlain Enterprises (N.D. New York 2004); Roberts v. Tausig (N.D. of Ohio 2000);
Shephard v. Dorsa (C.D. of California 1997), and Mohler v. Unger (W.D. of Ohio 1995).
Greenwald Decl., ¶ 52. Mr. Greenwald has also served as an expert witness and national speaker
at ESOP conventions on the subject of ESOP fiduciary litigation. Greenwald Decl., ¶ 53.
Terence Devine, co-counsel with Shayne &. Greenwald, is also experienced in ESOP litigation,
holds his Masters of Law in Taxation, and served as co-counsel with Shayne & Greenwald in
Henry v. Champlain Enterprises. Greenwald Decl., ¶ 54.
In handling this litigation, Plaintiffs‟ Counsel acted efficiently, with Mr. Greenwald and
Mr. Devine working closely to minimize cost whenever possible. Greenwald Decl., ¶ 55. For
example, at depositions and hearings before the Court, Mr. Greenwald was the sole
representative of Plaintiffs present for Keller Rohrback and its clients. Greenwald Decl., ¶ 56.
Similarly, Mr. Devine was in most cases the sole representative at depositions or hearings for
Plaintiff Rodwell. Id. Moreover, in several cases, Mr. Devine and Mr. Greenwald attended the
depositions by phone to avoid excessive travel expense. Greenwald Decl., ¶ 57.
In connection with conducting depositions and preparing legal briefs, Mr. Greenwald and
Mr. Devine avoided duplication by sharing the responsibility with each other. Greenwald Decl.,
¶ 58. For example, Mr. Greenwald took the responsibility for conducting the depositions of
McIntosh, Roorda, Mytels, Donnelly, Comfort, Heald, Eddy, and Locke, while Mr. Devine took
responsibility for conducting the depositions of Fenkell and Matthews. Greenwald Decl., ¶ 59.
With respect to the key witnesses, Defendants CRC, and Johanson, Mr. Greenwald and Mr.
Devine shared responsibility for conducting those depositions with no overlap of subject matter.
Case 2:05-cv-02046-RRB-GGH Document 734-2 Filed 01/19/2010 Page 32 of 40
28
Greenwald Decl., ¶ 60. Mr. Greenwald and Mr. Devine displayed the same efficiencies by
sharing the responsibility for all brief writing with virtually no overlap. Litigation efficiency was
always an important priority for Messrs. Greenwald and Devine. Greenwald Decl., ¶ 61.
7. Attorneys’ Fee Awards in Other Cases Support the Fee Requested Here.
In the Ninth Circuit, the 25% “benchmark” for attorneys‟ fees discussed above may be
adjusted upward or downward based on the specific circumstances in each case. Courts in this
Circuit have routinely awarded common fund cases of 33 1/3 % 3% in case, like this one,
involving unusual magnitude, complexity and contingency risk. See e.g.. In re Mego Fin. Corp.
Sec Litig., 213 F.3d 454, 463 (9th Cir. 2000) (affirming 33-1/3% award to class counsel); In re
Pac. Enters. Sec. Litig., 47 F.3d 373, 379 (9th Cir. 1995) (affirming award of 33-1/3%); Romero
1/3%); In re Heritage Bond Litig., 2005 WL 1594403, at *23 (C.D. Cal. Jun. 10, 2005) (same);
Linney v. Cellular Ala. P’ship, 1997 WL 450064, at *7 (N.D. Cal. Jul. 18, 1997 (same): “Courts
in this district have consistently approved attorneys‟ fees which amount to approximately one-
third of the relief procured for the class”); In re Pub. Serv. Co. of N.M., 1992 WL 278452, at *12
(S.D. Cal. Jul. 28, 1992) (awarding 33%, plus proportionate share of interest); Antonopulos v. N.
Am. Thoroughbreds, Inc., 1991 WL 427893, at (S.D. Cal. May 6, 1991) (awarding 33-1/3%).10
A review of all seven of the factors cited above confirms that Plaintiffs‟ Counsels‟
request for $450,000 plus 33-1/3% of the net amounts deposited into the Settlement Fund is 10
This is consistent with a survey of cases outside the Ninth Circuit demonstrating that common fund fee awards of 33 1/3% or higher are common nationwide. See, e.g., Frank v. Eastman Kodak Co., 228 F.R.D. 174 (W.D.N.Y. 2005) (awarding 40%): Gaskill v. Gordon, 942 F. Supp. 382, 387 (ND. Ill 1996) (awarding 38%); Faircloth v. Certified Fin., Inc., 2001 WL 527489, at *12 (E.D. La May 16, 2001) (awarding 35%); Stoner v. CBA Info Servs., 352 F. Supp. 2d 549, 553 (E.D. Pa 2005) (“A 33% fee is reasonable and well within the norm.”); In re Corel Corp., Inc. Sec Litig. 293 F. Supp. 2d 484, 498 (E.D. Pa 2003) (awarding 33-1/3%); In re Gen. Instrument Sec. Litig., 209 F. Supp. 2d 423, 434 (E.D. Pa 2001) (same); In re Safety Components, Inc. Sec. Litig., 166 F. Supp. 2d 72, 102 (D.N.J. 2001) (same) In re Med X-Ray Film Antitrust Litig., 1998 WL 661515, at *8 (E.D.N.Y, Aug 7, 1998) (same).
Case 2:05-cv-02046-RRB-GGH Document 734-2 Filed 01/19/2010 Page 33 of 40
29
reasonable and merited. The exceptional results obtained by Plaintiff‟s Counsel, despite
vigorous defense by several leading defense firms, the high risk and complexity of the case, and
the skill and efficiency with which the case was brought to a successful resolution, confirm the
reasonableness of the award. Indeed, as noted above, when the total value of the economic
benefits conferred by the efforts of Plaintiffs‟ Counsel are considered, the requested fee is at or
below the 25% benchmark established by the Ninth Circuit.
F. The Lodestar Method Also Confirms the Reasonableness of the Requested Fee
Courts in the Ninth Circuit often examine the lodestar calculation as a cross-check on the
percentage fee award to ensure that counsel will not receive a “windfall.” Vizcaino, 290 F.3d at
1050 (“[W]hile the primary basis of the fee award remains the percentage method, the lodestar
may provide a useful perspective on the reasonableness of a given percentage award”).11
The
cross-check is not designed to be “full-blown lodestar inquiry,” but rather an estimation of the
value of counsel‟s investment in the case. Third Circuit Task Force Report, Selection of Plaintiffs’
Counsel, 208 F.R.D. 340, 422-23 (2002) (noting that “[t]he lodestar remains difficult and
burdensome to apply, and it positively encourages counsel to run up the bill, expending hours that
are of no benefit to the class”).
The cross-check is a two step process. First, the lodestar is determined by multiplying the
number of hours reasonably expended by the reasonable rates requested by the attorneys, See
Caudle v. Bristow Optical Co., 224 F.3d 1014, 1028 (9th Cir. 2000). Second, the court determines
the multiplier required to match the lodestar to the percentage-of-the-fund request made by
11
Common fund attorneys‟ fees are often much higher than counsel‟s lodestar. See, Torrisi v. Tucson Elec. Power Co., 8 F.3d 1370, 1376-77 (9th Cir. 1993) (affirming common fund award that represented more than twice the lodestar); Vizcaino, 290 F3d at 1051 (approving multiplier of 3.65 of lodestar); Wal Mart Stores, Inc. v. Visa USA, Inc. 396 F.3d 96, 123 (2d Cir 2005) (approving multiplier of 3.5); In re Safety Components, Inc. Sec Litig., 166 F. Supp. 2d 72, 104 (D.N.J. 2001) (approving multiplier of 2.81 and citing cases approving multipliers from 2.04-3.6).
Case 2:05-cv-02046-RRB-GGH Document 734-2 Filed 01/19/2010 Page 34 of 40
30
counsel, and determines whether the multiplier falls within the accepted range for such a case.
Here, the lodestar cross-check confirms that the fee request is reasonable.
1. Plaintiffs’ Counsels’ Hours and Rates Are Reasonable
Plaintiffs‟ Counsel and staff have spent a total of approximately 10,000 professional
hours working on this case (after reductions for redundant efforts or work for which billing is
inappropriate and exclusive of hours on Preliminary Injunction I and the Ninth Circuit appeal).
See Sarko Decl. Ex. 5; Devine Decl. Exs. A-D; Greenwald Decl., Ex. 1-2. As reflected in the
Sarko, Greenwald, and Devine Declarations, the hours claimed were incurred by, among other
things, investigating the claims against Defendants, reviewing and analyzing Plan documents and
information, preparing the Complaint and amendments thereto, conducting necessary legal
research, retaining and working with experts, briefing and arguing Defendants‟ motions to
dismiss, briefing and arguing a multitude of motions, briefing and arguing Defendant‟s appeal of
the preliminary injunctions, engaging in extensive mediation and settlement negotiations,
conducting extensive discovery, and preparing the necessary agreements and pleadings related to
the Settlement. Given these activities, the complexity of the legal issues involved, and the
intensity of Defendants‟ defense, the hours incurred are reasonable. Further, as reflected in the
Sarko Decl. and Devine Decl., Plaintiffs‟ Counsel anticipates expending substantial additional
hours in connection with administration and finalization of the Settlement. Sarko Decl. ¶¶ 17-18.
The expended hours are particularly reasonable given the efforts of counsel at efficiency.
Mr. Greenwald, prepared for and conducted depositions, researched and prepared all motions
and memoranda after discovery commenced, with only very limited assistance from other KR
personnel. Greenwald Decl., ¶ 62. Similarly, Mr. Devine used almost no one else within his
firm, but rather relied on the associates, paralegals and support staff of at KR. Greenwald Decl.,
Case 2:05-cv-02046-RRB-GGH Document 734-2 Filed 01/19/2010 Page 35 of 40
31
¶ 63. Moreover, even in key depositions of the individual Defendants, the examinations were
divided between Mr. Greenwald and Mr. Devine with no overlap of subject matter. Greenwald
Decl., ¶ 60. With respect to the extensive brief to the Ninth Circuit, Mr. Greenwald and Mr.
Devine assumed responsibilities for different issues to avoid unnecessary duplication of efforts.
Greenwald Decl., ¶ 65. These efforts enabled Counsel to deal with the complexity of the case,
the voluminous documents, and the extended period of time involved on a complementary (as
opposed to redundant) basis. Greenwald Decl., ¶ 66.
Plaintiffs‟ Counsels‟ rates, between $260.00 and $695.00 per hour are reasonable based
on each attorney‟s position, experience level, location and other relevant considerations. See
Sarko Decl. ¶ 13-16, Ex. 5; Greenwald Decl., ¶ 113; Devine Decl., ¶ 18. These rates are based
on the prevailing rates in the communities in which Plaintiffs‟ Counsel practice or on hourly
rates obtained by counsel in other complex or class action litigation. See Bouman v. Block, 940
F.2d 1211, 1235 (9th Cir. 1991) (finding that declarations submitted by counsel of the
“prevailing market rate in the relevant community . . . [are] sufficient to establish the appropriate
[billing] rate for lodestar purposes”); Mogck v. Unum Life Ins. Co. of Am., 289 F. Supp. 2d 1181,
1191 (S.D. Cal. 2003) (ruling that in ERISA cases, “it is appropriate to consider the declarations
of attorneys in other jurisdictions because ERISA cases involve a national standard and attorneys
practicing ERISA law in the Ninth Circuit tend to practice in different districts”). Taking into
account the several factors discussed above, including the result achieved, the non-monetary
benefits of the Settlement, the complexity and risk of the litigation, and the skill and experience
of counsel, Plaintiffs‟ Counsels‟ rates are reasonable and appropriate in this case.
Case 2:05-cv-02046-RRB-GGH Document 734-2 Filed 01/19/2010 Page 36 of 40
32
2. The Multiplier Is Reasonable
Plaintiffs‟ Counsels‟ reasonable hours and reasonable rates produce a current lodestar of
over $4,600,000. As noted above, the range of the fee award sought is expected to be between
$4.32 million and $5.4 million, depending on the value ultimately realized from the Palm Desert
Property and the tax benefits realized by CRC. Therefore, the fee award sought will range from
94% to 117% of the lodestar. In other words, Plaintiffs‟ Counsel will receive no significant
multiplier at all, and may even under-realize on the case. Thus, the lodestar method as a cross-
check confirms the appropriateness of the requested fee.
G. Plaintiffs’ Counsel Should Be Reimbursed For Their Expenses And Plaintiffs Should Receive Incentive Awards
Plaintiffs‟ Counsel also requests reimbursement for the reasonable and necessary
expenses advanced to prosecute this litigation. These expenses, totaling $449,012, are detailed
in the Sarko, Greenwald, and Devine declarations and supporting exhibits. See Sarko Decl.
¶¶ 128-132, Ex. 6; Greenwald Decl., Ex. 3; Devine Decl. Exs. A, B and D. Such expenses are
awarded routinely following settlement of common fund cases. See Linney v. Cellular Alaska
P’ship, 1997 WL 450064, at *7 (N.D. Cal. Jul. 18, 1997) (“It appears to the Court that the costs
requested are reasonable in light of the complexity of the litigation and the number of counsel
involved, and [the costs of litigation] are therefore approved by the Court.”).
Plaintiffs‟ Counsels‟ expenses include over $139,000 for experts that were both
reasonable and necessary to the litigation. The remainder of the expenses advanced by
Plaintiffs‟ Counsel was for travel, photocopying, legal research, telephone, facsimile, postage,
and other reasonable and necessary costs that pertain to this litigation and which are incurred
routinely in any litigation of this size and complexity. See, e.g., McPhail v. First Command Fin.
Planning, Inc., 2009 WL 839841, at *8 (S.D. Cal. Mar. 30, 2009) (awarding $815,850.17 in
Case 2:05-cv-02046-RRB-GGH Document 734-2 Filed 01/19/2010 Page 37 of 40
33
costs to counsel); Kolar v. Rite Aid, 2003 WL 1257272, at *6 (E.D. Pa. Mar. 11, 2003) (finding
$159,059.77 in costs and expense were “reasonable for a complex matter that has been pending
as long as this one [2 years]”).
The Settlement Agreement expressly provides for payment of Plaintiffs‟ Counsels‟
litigation expenses, and the Notice informed Affected Participants that Plaintiffs‟ Counsel would
seek reimbursement of expenses from the Settlement Fund. For all these reasons, the Court
should reimburse Plaintiffs‟ Counsel for their reasonably incurred expenses.
H. Plaintiffs Should Receive Incentive Awards
Finally, Plaintiffs‟ Counsel request that the Court award Plaintiffs a total of $40,000 for
the time they have expended in prosecuting this action. Plaintiffs‟ Counsel propose that $10,000
(in addition to what they will otherwise receive from the ESOP distribution) be awarded to each
of Plaintiffs Johnson, Rodwell and Stanton, who, in addition to devoting substantial time to
bringing these actions and monitoring their progress, also were required to sit for deposition.
Plaintiffs‟ Counsel propose that $5,000 be awarded to each of Plaintiffs Morrell and Rangel, who
also devoted substantial time to the prosecution of these actions, but were not deposed. The
criteria courts consider when determining whether to reward a class representative and the
amount of the award include: (1) the risk to the class representative in commencing a class
action; (2) the notoriety and personal difficulties encountered; (3) the amount of time and effort
spent by the class representative; (4) the duration of the litigation; and (5) the personal benefit, or
lack thereof, enjoyed as a result of the litigation. See Trujillo v. City of Ontario, 2009 WL
2632723 (C.D. Cal. Aug. 24, 2009).
The requested award is fair and in line with what other courts have awarded in similar
cases. See, e.g., Pelletz v. Weyerhaeuser Co., 592 F. Supp. 2d 1322, 1330 (W.D. Wash. 2009)
Case 2:05-cv-02046-RRB-GGH Document 734-2 Filed 01/19/2010 Page 38 of 40
34
(awarding $30,000 to four plaintiffs); Razilov v. Nationwide Mut. Ins. Co., 2006 WL 3312024,
*3-*4 (D. Or. Nov. 13, 2006) (approving $10,000 award to each class representative); In re Xcel
Energy Inc., Sec., Derivative, and ERISA Litig., 364 F. Supp. 2d 980, 1000 (D. Minn. 2005)
(awarding $100,000 collectively to a group of eight lead plaintiffs). In Linney v. Cellular Alaska
Partnership, the court awarded $25,000 to the two class representatives in a case involving a $6
million settlement, explained that “[i]ncentive fees for class representatives serve much the same
function as attorneys‟ fees do in the class action context: they provide the economic incentive
necessary to ensure that meritorious actions are prosecuted.” 1997 WL 450064 at *7. Thus,
Plaintiffs‟ Counsel respectfully request that the Court award $10,000 to each of Plaintiffs
Johnson, Rodwell and Stanton, and $5,000 to each of Plaintiff Rangell and Morrell, for their
valuable services in connection with this litigation.
IV. CONCLUSION
The litigation presented substantial risk and complexity. Plaintiffs‟ Counsel
demonstrated considerable ability to produce an extremely favorable result. The Court should
approve the payment of Counsels‟ expenses, payment of attorney‟ fees in an amount equal to 33-
1/3/% of the amount paid into the Settlement Fund, and a payment of attorneys‟ fees of $450,000
for securing Preliminary Injunction I and successfully defending the Appeal in the Ninth Circuit
Court of Appeals.12
12
While KR and DMS are in agreement with respect to the apportionment among them of any fee award, they have not reached an agreement with Mr. Shayne with respect to the apportionment of the fee award. If such an agreement cannot be reached, KR and DMS would consent to the submission of the matter to Judge Mueller or Judge Hollows for binding resolution.
Case 2:05-cv-02046-RRB-GGH Document 734-2 Filed 01/19/2010 Page 39 of 40
35
DATED: January 19, 2010. KELLER ROHRBACK, P.L.C. By: /s/ Gary D. Greenwald Ron Kilgard Gary A. Sarko Gary D. Greenwald 3101 North Central Avenue, Suite 1400 Phoenix, Arizona 85012 KELLER ROHRBACK, L.L.P. Juli E. Farris 1201 Third Avenue, Suite 3200 Seattle, Washington 98101 Attorneys for Plaintiffs Johnson, Rangel, Morrell, and Stanton DEVINE, MARKOVITS & SNYDER, LLP Terence J. Devine 52 Corporate Circle Albany, New York 12203 Attorneys for Plaintiff Rodwell
Case 2:05-cv-02046-RRB-GGH Document 734-2 Filed 01/19/2010 Page 40 of 40
1
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
Juli E. Farris (SBN 141716) KELLER ROHRBACK, L.L.P. 1201 Third Avenue, Suite 3200 Seattle, Washington 98101 Telephone: (206) 623-1900 Facsimile: (206) 623-3384 [email protected] Attorneys for Moving Plaintiffs Additional Counsel on Signature Page
UNITED STATES DISTRICT COURT EASTERN DISTRICT OF CALIFORNIA
SACRAMENTO DIVISION
GREGORY JOHNSON, et al., Plaintiffs, v. CLAIR R. COUTURIER, JR., et al., Defendants,
[PROPOSED ORDER] GRANTING AWARD OF ATTORNEYS’ FEES,
REIMBURSEMENT OF EXPENSES, AND PLAINTIFF
INCENTIVE AWARDS
DARLEEN STANTON, Plaintiff, v. CLAIR R. COUTURIER, JR., et al. Defendants.
No. 2:07-CV-01208 WBS-JFM (Consolidated under 2:05-CV-02046 RRB GGH)
TO ALL PARTIES AND THEIR ATTORNEYS OF RECORD:
The Motion for Award of Attorneys’ Fees, Reimbursement of Expenses, and Plaintiff
Incentive Awards is hereby GRANTED.
Case 2:05-cv-02046-RRB-GGH Document 734-3 Filed 01/19/2010 Page 1 of 2
2
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
Dated:_____________________ The Honorable Ralph R. Beistline United States Judge
Case 2:05-cv-02046-RRB-GGH Document 734-3 Filed 01/19/2010 Page 2 of 2
1 Certificate of Service
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
Juli E. Farris (SBN 141716) KELLER ROHRBACK, L.L.P. 1201 Third Avenue, Suite 3200 Seattle, Washington 98101 Telephone: (206) 623-1900 Facsimile: (206) 623-3384 [email protected] Attorneys for Plaintiffs Additional Counsel on Signature Page
UNITED STATES DISTRICT COURT EASTERN DISTRICT OF CALIFORNIA
SACRAMENTO DIVISION
GREGORY JOHNSON, et al., Plaintiffs, v. CLAIR R. COUTURIER, JR., et al., Defendants,
No. 2:05-cv-02046 RRB KJM (Lead Case-Consolidated) CERTIFICATE OF SERVICE
DARLEEN STANTON, Plaintiff, v. CLAIR R. COUTURIER, JR., et al. Defendants.
No. 2:07-CV-01208 WBS-JFM (Consolidated under 2:05-CV-02046 RRB KJM)
The undersigned hereby certifies that on January 19, 2010, Plaintiffs’ Motion for
Award of Attorneys’ Fees, Reimbursement of Expenses, and Plaintiff Incentive Awards,
Memorandum, and Declarations of Lynn Lincoln Sarko, Gary D. Greenwald, Terry
Devine, and Proposed Order were filed electronically. Notice of this filing will be sent to
Case 2:05-cv-02046-RRB-GGH Document 734-4 Filed 01/19/2010 Page 1 of 4
2 Certificate of Service
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
all parties listed below by operation of the Court’s electronic system. Parties may access this
filing through the Court’s system. In addition, a copy of this filing will be e-mailed to
Defendant Mr. Robert Eddy at the e-mail address noted below.
Julie A. Govreau Michael F. Derksen Richard J. Pearl
Morgan, Lewis & Bockius LLP. 77 West Wacker Drive Chicago, Illinois 60601 Attorneys for Defendant Couturier Elizabeth A. Frohlich Joseph E. Floren Morgan Lewis and Bockius LLP Spear Street Tower One Market Street, Suite 28 San Francisco, California 94105 Attorneys for Defendant Couturier
M. Taylor Florence Kevin A. Hughey
Bullivant Houser Bailey PC 1415 L Street, Suite 1000 Sacramento, California 95814
Attorneys for Defendant Noll Manufacturing Company Employee Stock Ownership Plan and Trust
Case 2:05-cv-02046-RRB-GGH Document 734-4 Filed 01/19/2010 Page 2 of 4
3 Certificate of Service
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
Robert B. Miller Kilmer Voorhees & Laurick PC 732 NW 19th Avenue Portland, Oregon 97209
Attorneys for Defendant Noll Manufacturing Company Employee Stock Ownership Plan and Trust Cynthia J. Larsen Stacy Erin Don Orrick Herrington & Sutcliffe LLP 400 Capitol Mall, Suite 3000 Sacramento, California 95814 Attorneys for Defendants The Nominal Corporate Defendants Christopher J. Rillo Kathleen A. Stimeling Schiff Hardin LLP One Market, Spear Street Tower, 32nd Floor San Francisco, California 94105 Attorneys for Defendant Johanson Mary Jo Shartsis
Kajsa M. Minor Shartsis Friese LLP One Maritime Plaza, 18th Floor San Francisco, California 94111 Attorneys for Defendant Pensco, Inc. Elizabeth Hopkins Michael Schloss Robyn M. Swanson U.S. Department of Labor Office of the Solicitor Plan Benefits Security Division P.O. Box 1914 Washington, D.C. 20013 Attorneys for Secretary of the
United States Department of Labor as Amicus Curiae
Case 2:05-cv-02046-RRB-GGH Document 734-4 Filed 01/19/2010 Page 3 of 4
4 Certificate of Service
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
Danielle L. Jaberg Counsel for ERISA United States Department of Labor Office of the Solicitor 90 7th Street, Suite 3-700 San Francisco, California 94103-1516 Attorneys for Secretary of the United States Department of Labor as Amicus Curiae
Gary A. Gotto Gary D. Greenwald
Ron Kilgard Keller Rohrback PLC 3101 North Central Avenue, Suite 1400 Phoenix, Arizona 85012 Attorneys for Plaintiffs Johnson, Rangel, Morrell and Stanton Juli E. Farris Keller Rohrback LLP 1201 Third Avenue, Suite 3200 Seattle, Washington 98101 Attorneys for Plaintiffs Johnson, Rangel, Morrell and Stanton Stanley H. Shayne Shayne Nichols LLC Two Miranova Place, Suite 220 Columbus, Ohio 43215 Attorneys for Plaintiff Rodwell
Terence J. Devine
Devine, Markovits & Snyder, LLP 52 Corporate Circle Albany, New York 12203 Attorneys for Plaintiff Rodwell
Matthew Righetti Righetti Law Firm PC 456 Montgomery Street, Suite 1400 San Francisco, California 94104
Attorneys for Plaintiff Rodwell
By: /s/ Gary D. Greenwald
Case 2:05-cv-02046-RRB-GGH Document 734-4 Filed 01/19/2010 Page 4 of 4
1
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
Juli E. Farris (SBN 141716) KELLER ROHRBACK, L.L.P. 1201 Third Avenue, Suite 3200 Seattle, Washington 98101 Telephone: (206) 623-1900 Facsimile: (206) 623-3384 [email protected] Attorneys for Moving Plaintiffs Additional Counsel on Signature Page
UNITED STATES DISTRICT COURT EASTERN DISTRICT OF CALIFORNIA
SACRAMENTO DIVISION
GREGORY JOHNSON, et al., Plaintiffs, v. CLAIR R. COUTURIER, JR., et al., Defendants,
to continue or stay the litigation in this case (Dkt. 155, 342, 350, 455,
486, 496, 617, 641; appeal filed in 9th Circuit Court of Appeals for
Johnson, et al. v. Couturier, No. 08-17369, et al., at Dkt. 25).
Motions for Sanctions. KR prepared and responded to various motions
for sanctions (Dkt. 74, 326, 479)
ix.
.
Motions to Supplement Complaint.
c.
KR prepared motions to
supplement the complaint in this matter (DKT. 322, 483).
Experts
i. James Sillery (an executive compensation expert, who was replaced
when a conflict of interest developed);
. KR retained and consulted with several experts in connection with
this litigation, including the following:
ii. Donald Delves of the Delves Group, a nationally-recognized executive
compensation consultant. Mr. Delves issued his final report in August,
2009.
iii. Terence Griswold of Empire Valuation Consultants, an ESOP appraisal
consultant, retained to provide services with respect to the appraisals
Case 2:05-cv-02046-RRB-GGH Document 735 Filed 01/19/2010 Page 4 of 10
5
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
issued by defense witnesses Dennis Locke (Moss Adams Advisory
Services) and Matthew Donnelly (California Appraisal Institute).
iv. Professors Geoffrey Hazard and John Strait, retained in connection
with the response to Defendants’ motions to disqualify counsel.
v. Robert J. Werner, an ERISA tax attorney retained in connection with
Plaintiffs’ motion for partial summary judgment.
vi. Brad Ostroff and Richard Onsager, tax attorneys with experience in
prosecuting tax refund claims and other pertinent tax issues, retained in
connection with the documentation of the Settlement.
d. Depositions
e.
. Exhibit 3 hereto contains a list of the 15 witnesses deposed by
Plaintiffs and Defendants. These depositions took place over 21 days. In the
course of the depositions, 503 documents were marked as exhibits.
Trial Preparation
f.
. When the Settlement was reached, fact discovery in the
litigation was nearly complete and the trial date was less than three months
away. As a result, substantial trial preparation work was completed prior to the
Settlement.
Settlement Negotiation. The Parties engaged in three unsuccessful mediations
before the mediation before Judge Mueller that resulted in the Settlement. The
first mediation was conducted in March, 2007, before Judge Edward Stern in
San Francisco. The second mediation was an informal process conducted in
the summer of 2008 by Jack Pfeffer, a TEOHC director appointed in 2008.
Mr. Pfeffer met separately with counsel for Plaintiffs (in June and August,
2008) and counsel for Defendants in an unsuccessful effort to reach settlement.
Case 2:05-cv-02046-RRB-GGH Document 735 Filed 01/19/2010 Page 5 of 10
6
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
The third mediation was conducted by Anthony Piazza in February, 2009. The
mediation before Judge Mueller was conducted over two days in November,
2009, with extensive follow-up telephonic discussions. The documentation of
the Settlement was quite complex and required the preparation of numerous
drafts of the Settlement Agreement and related papers. Gary Gotto of KR was
the primary draftsman of the documents.
6. KR has played a leading role in the development of this area of law by obtaining
favorable landmark decisions and recovering over $900 million dollars on behalf of
employees in this type of ERISA case. Keller Rohrback serves or has served in a leadership
capacity in numerous prominent ERISA cases filed throughout the country,1 including several
within this Circuit.2
7. KR’s work as lead counsel in ERISA cases has been widely praised. For example, in
the WorldCom ERISA Litigation, in which Keller Rohrback served as lead counsel, Judge
Cote found that:
Lead Counsel has performed an important public service in this action and has done s o e fficiently a nd w ith i ntegrity. I t ha s c ooperated c ompletely a nd i n novel ways with Lead Counsel for the Securities Litigation and in doing so all of them have worked to reduce legal expenses and maximize recovery for class members. L ead C ounsel . . . ha s also w orked c reatively and di ligently t o obtain a set tlement f rom WorldCom i n t he c ontext of c omplex a nd di fficult legal que stions. . . . Lead C ounsel s hould be a ppropriately r ewarded a s a n incentive for t he further protection of e mployees and their pension pl ans not only in this litigation but in all ERISA actions.
1 The numerous ERISA breach of fiduciary duty cases for which Keller Rohrback serves or has served as lead or co-lead counsel are provided in the resume of Keller Rohrback’s Complex Litigation Group, attached hereto as Ex. 4. 2 See Alvidres v. Countrwide Financial Corp., No. 07-05810 (C.D. Cal.); In re IndyMac ERISA Litig., No. 08-4579 (C.D. Cal.); In re Fremont Gen. Corp. Litig., No. 07-02693 (C.D. Cal.); In re Washington Mutual, Inc. ERISA Litig., No. 08-1919 (W.D. Wash.); and In re Syncor ERISA Litig., No. 06-55265 (C.D. Cal.), which resulted in the lead ERISA company stock decision in the Ninth Circuit, In re Syncor ERISA Litig., 516 F.3d 1095 (9th Cir. 2008) (reversal of summary judgment).
Case 2:05-cv-02046-RRB-GGH Document 735 Filed 01/19/2010 Page 6 of 10
7
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
In re WorldCom, Inc. ERISA Litig., No. 02-4816, 2004 WL 2338151, a t *10 ( S.D.N.Y. Oct.
18, 2004). 8. KR’s Complex Litigation and ERISA team is led by the firm’s Managing Partner,
Declarant Lynn Lincoln Sarko. I received both my M.B.A. and law degree from the
University of Wisconsin, where I served as Editor-in-Chief of the Wisconsin Law Review and
was selected by faculty as the outstanding graduate of my law school class. I am a former
Assistant United States Attorney and Ninth Circuit judicial law clerk (Hon. Jerome Farris). I
have been actively engaged in the prosecution of complex litigation for two decades. I have
served as lead or co-lead counsel in several leading ERISA cases, including the largest and
most complex—Enron, WorldCom, and Global Crossing, to name a few—and numerous
other cases. In these ERISA actions, I have worked closely with the U.S. Department of
Labor on various issues, established relationships with many of the key experts in the field,
and worked extensively with counsel in parallel securities and derivative cases, developing
systems for effectively coordinating the discovery across these cases.
9. In addition to my work as lead or co-lead counsel in these prominent ERISA cases, I
have prosecuted a variety of class actions involving high profile matters including the Exxon
Valdez oil spill, the Microsoft civil antitrust case, the Vitamins price-fixing cases, the MDL
Fen/Phen Diet drug litigation, as well as notable public service lawsuits such as Erickson v.
Bartell Drug Co., establishing a woman’s right to prescription contraceptive health coverage.
Aided in part by my M.B.A. in accounting, I have also litigated numerous complex cases
involving financial and accounting fraud, including actions against several of the nation’s
largest accounting and investment firms.
10. The Keller Rohrback complex litigation ERISA team is also highly accomplished, and
includes numerous lawyers whose practices focus primarily on ERISA breach of fiduciary
Case 2:05-cv-02046-RRB-GGH Document 735 Filed 01/19/2010 Page 7 of 10
8
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
duty cases, including Gary D. Greenwald and Gary A. Gotto, the KR attorneys who worked
primarily on these cases. Mr. Greenwald is a 1971 graduate of the Ohio State University
College of Law and has practice in the field of complex business litigation for over 38 years.
Mr. Greenwald, has practiced for over 18 years in ERISA law, has served as lead counsel for
ESOP participants in litigation involving breach of fiduciary and prohibited transactions in
district courts in the states of New York, New Jersey, Ohio, Illinois, Missouri, Oregon, and
California. Mr. Gotto is a 1982 graduate, summa cum laude, of the Arizona State University
College of Law, and has been recognized as a “Super Lawyer” since 2007. Mr. Gotto has
extensive experience in ERISA breach of fiduciary duty litigation, and has been one of the
KR attorneys with primary responsibility in numerous cases in which KR has been lead or co-
lead counsel, including the Enron, WorldCom, Global Crossing, Xerox, Delphi Corporation
and Merrill Lynch ERISA cases.
11. KR staffed the litigation in an extremely efficient manner. Gary Greenwald had
primary responsibility for the representation. He handled the vast bulk of the briefing, and
virtually all aspects of discovery, with the assistance of a paralegal, and with other KR
lawyers and paralegals providing limited assistance as was necessary from time to time. Gary
Gotto was involved in settlement negotiations and documentation. Messrs. Greenwald and
Gotto worked closely throughout the litigation with Terence Devine, litigation counsel for
Plaintiff Rodwell, to minimize duplication and optimize efficiency in the prosecution of these
cases.
12. To date, KR has devoted more than 5,176 attorney and paralegal hours to these case.
Since the inception of this case, in accordance with its normal business practices, KR has
maintained detailed and contemporaneous records of the time spent by its lawyers, law clerks,
Case 2:05-cv-02046-RRB-GGH Document 735 Filed 01/19/2010 Page 8 of 10
9
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
paralegals, and certain other personnel on this action. Our timekeepers have been and are
required to keep daily time-records, both noting amounts of time spent on projects and
providing descriptions of that work. These records then are computerized, checked, and
maintained in databases. These systems allow us to be confident that the hours reported for
these cases are accurate.
13. The schedule attached as Exhibit 5 is a detailed summary indicating the time spent by
KR attorneys and other professional support staff in this litigation and the lodestar calculation
based on the firm’s current billing rates. For personnel who are no longer employed by the
firm, the lodestar calculation is based upon the billing rates for such personnel in his or her
final year of employment by KR.
14. The hourly rates charged by KR in these cases are the rates that have been or could be
charged as usual and customary hourly rates for its work performed. KR’s rates, between
$260.00 and $695.00 per hour are reasonable based on each attorney’s position, experience
level, and location. These rates, which are based on the prevailing rates in the communities in
which KR practices or on hourly rates obtained by counsel in other complex or class action
litigation. KR’s hourly rates have been approved for payment by federal and state courts in
other litigation for many years and throughout the time this litigation has been pending.
15. If KR’s hours had been billed on a “straight” hourly basis (i.e., no contingency and no
risk of non-payment), the lodestar (hours times current billing rates) for this professional time
would be approximately $2,610,526. Of this time, approximately $188,686 relates to KR’s
successful efforts to secure injunctive relief with respect to the Defendants’ attempts to obtain
indemnification from TEOHC.
Case 2:05-cv-02046-RRB-GGH Document 735 Filed 01/19/2010 Page 9 of 10
10
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
16. KR’s successful efforts to obtain injunctive relief preserved at least $4,500,000 in
TEOHC assets which benefit the ESOP and its participants on a dollar-for-dollar basis. The
expenses incurred are commercially reasonable and are reflected on KR’s books and records.
These books and records are prepared from expense vouchers, check records, and other source
materials, and they represent an accurate record of the expenses incurred. The expenses
include necessary travel, expert witnesses and copying, as well as telephone, fax, computer
aided research, and document database storage and maintenance. A summary of KR’s
expenses is attached hereto as Exhibit 6.
17. Plaintiffs’ counsel will continue to devote additional attorney hours in connection with
final approval of the Settlement, including preparation for and appearance at the Fairness
Hearing.
18. It is anticipated that significant efforts will be required of Plaintiffs’ counsel in
connection with on-going administration of the Settlement, including monitoring and
otherwise participating in TEOHC’s efforts to sell the Palm Desert Property and CRC’s
efforts to realize tax benefits from the return of the Palm Desert Property.
I declare under penalty of perjury under the laws of the United States of America that
the foregoing is true and correct. This Declaration was executed this 19th day of January,
2010, at Phoenix, Arizona.
By: _/s/ Lynn Lincoln Sarko
_______________
Case 2:05-cv-02046-RRB-GGH Document 735 Filed 01/19/2010 Page 10 of 10
Exhibit 1 Document Production
Party Producing Documents
Bates Range Date Produced/Comments
Alliance Holdings AHI1-1491
6.29.06, 2.1.08.
Business Equity Appraisal Reports.
BEA1-242 6.24.08; produced in response to Plaintiffs’ Subpoena.
Consulting Fiduciaries, Inc. (David Heald)
CFC1-29686 9.25.09; produced in response to Couturier’s Subpoena.
Mark Comfort COM1-130 3.30.09, 4.25.09.
Mark Comfort
MC1-388 10.14.09; produced during Comfort’s deposition.
Couturier
CC1-32805 9.21.06.
Couturier ACC-STMT1-2146 8.7.09, 9.24.09, 10.28.09, 10.29.09, 11.6.09; Couturier accounting as ordered by Judge Beistline.
Case 2:05-cv-02046-RRB-GGH Document 735-2 Filed 01/19/2010 Page 1 of 5
Donald Delves
DEL1-83 8.27.09; Plaintiffs’ Expert’s Report
Matthew Donnelly DON1-412
4.27.07; produced in response to Plaintiffs’ Subpoena.
Robert Eddy EDDY1-4844 10.30.07, 11.27.07, 7.7.08.
5.16.08, 6.2.08, 10.7.09; produced in response to Couturier’s Subpoena.
Johanson Berenson CCSubpoena1-1123 3.22.06; produced in response to Plaintiffs’ Subpoena.
Johanson Berenson JB1-3181
5.9.07, 6.2.08, 10.8.08, 10.14.08.
Anthony Mathews
M1-42 12.29.08.
Case 2:05-cv-02046-RRB-GGH Document 735-2 Filed 01/19/2010 Page 2 of 5
Thomas McIntosh
FMFC1-1444 11.5.07, 11.20.07.
Thomas McIntosh
MC1-72 7.13.05.
Thomas McIntosh
TM1-1675 11.9.07, 10.8.08
Thomas McIntosh
TM1676-5765 11.7.07; produced in response to Couturier’s Subpoena.
Thomas McIntosh TMJ1-10
11.5.07.
Moss Adams
MA1-10777 MA2-1-21583
9.21.06, 6.08, 7.08.
Dan Mytels DM1-4102 6.26.06; produced by Couturier.
Noll Manufacturing, Co.
NOLL1-2397 2.12.08.
Pensco
PEN1-401 11.26.08.
Plaintiffs PLN1-174
3.17.08, 8.21.09.
ProESOP
PROF1-974 9.8.09; produced pursuant to Couturier’s Subpoena.
William Rodwell
WR1-243 10.21.09; produced at the time of Rodwell’s deposition.
Case 2:05-cv-02046-RRB-GGH Document 735-2 Filed 01/19/2010 Page 3 of 5
Roorda, Piquet & Bessee
RPB1-9730 4.26.07, 11.14.07; produced in response to Plaintiffs’ Subpoena.
Roorda, Piquet & Bessee
RPBSubpoena1-171 9.22.09; produced in response to Couturier’s Subpoena.
Darleen Stanton
STA1-86 3.21.07, 1.2.08.
Stanton Group
STG1-642 4.6.07; produced in response to Plaintiffs’ Subpoena.
TEOHC NOM1-30 5.28.09; produced in the Bruce P. Couturier matter.
TEOHC TEOHC1-8523 NOTE: we received the documents from Shayne & Greenwald on 9.21.06 – I don’t know when they received them, 7.30.08.
TEOHC TEOHC8524-9358 10.16.09; Produced in response to Couturier’s First Request for Production.
Case 2:05-cv-02046-RRB-GGH Document 735-2 Filed 01/19/2010 Page 4 of 5
TEOHC XX1-24 9.8.09.
Case 2:05-cv-02046-RRB-GGH Document 735-2 Filed 01/19/2010 Page 5 of 5
1
Exhibit 2 Motion Practice
Motion Date Docket
Number Filer Ruling
Motion for Summary Judgment 7.7.06 41 Couturier, Johanson, Eddy
Denied, Dkt. 95
Motion for Sanctions 8.9.06 74 Couturier, Johanson, Eddy
Denied, Dkt. 95
Motion to Stay Discovery 5.8.07 155 Johanson Berenson
Denied, Dkt. 177
Motion to Dismiss 5.16.07 163 Johanson
Denied, Dkt. 233
Motion to Dismiss 5.16.07 165 Couturier
Denied, Dkt. 233
Motion to Dismiss 5.16.07 167 Johanson Berenson
Denied, Dkt. 234
Motion to Dismiss 6.15.07 185 Eddy
Denied, Dkt. 233
Motion to Dismiss 8.30.07 212 TEOHC
Denied, Dkt. 233
Motion to Dismiss 11.26.07 248 Johanson
Denied, Dkt. 262
Motion to Compel Arbitration and Stay Action
7.27.07 203 Johanson Berenson
Granted, Dkt. 234
Case 2:05-cv-02046-RRB-GGH Document 735-3 Filed 01/19/2010 Page 1 of 5
2
Motion for Discovery 9.28.07 219 Johanson Johanson Berenson
Denied, Dkt. 223
Motion to Extend Time Limits for Roorda Deposition
10.24.07 10.25.07
229 231
Plaintiffs Granted, Dkt. 241
Motion to Extend Time Limits for Johanson and Roorda Depositions
4.9.08 293 Plaintiffs Granted, Dkt. 309
Motion to Compel Discovery from Pensco
2.19.07 260 Plaintiffs Granted in part, Dkt. 268; Denied in part, Dkt. 565
Motion to Reconsider Ruling re Motion to Compel Discovery from Pensco
2.1.08 269 Couturier Denied, Dkt. 406
Motion to Seal Motion to Disqualify Plaintiffs’ Counsel
2.5.08 270 Johanson Denied, Dkt. 309
Motion to Dissolve Protective Order
3.31.08 290 Plaintiffs Granted, Dkt. 315
Motion for Sanctions re Defense Counsels’ Discovery Abuses
8.20.08 326 Plaintiffs Ct. Set Rules for Conduct at Depos, Dkt. 498
Motion for TRO
8.18.08 321 Plaintiffs Granted, Dkt. 367, 398
Motion to File Supplemental Complaint In Stanter
8.18.08 322 Plaintiffs No Decision as of Settlement
Case 2:05-cv-02046-RRB-GGH Document 735-3 Filed 01/19/2010 Page 2 of 5
3
Motion to Compel Production of Documents Withheld Under Attorney-Client Privilege
8.26.08 337 Plaintiffs Granted with exception of Eddy, Dkt. 545, 547
Motion to Continue Hearing Date
9.4.08 342 Eddy No Decision as of Settlement
Motion to Stay Pending Settlement Conference
9.8.08 350 TEOHC No Decision as of Settlement
Motion for Order to Show Cause
9.18.08 363 Plaintiffs Denied, Dkt, 382
Motion to Vacate Motion for Order to Show Cause
9.19.08 371 Johanson No Decision as of Settlement
Motion to Strike Certain Statements of Evidence Submitted by Johanson
9.19.08 379 TEOHC No Decision as of Settlement
Motion for Second TRO
10.15.08 407 Plaintiffs Granted, Dkt. 450
Motion to Continue October 30, 2008, Hearing Date
10.27.08 455 Couturier, Johanson, Eddy
Denied, Dkt. 465
Motion to Strike
11.14.08 479 Couturier No Decision as of Settlement
Motion to File Instanter Supplemental Complaint to add Bruce Couturier
11.24.08 483 Plaintiffs Denied, Dkt. 539
Case 2:05-cv-02046-RRB-GGH Document 735-3 Filed 01/19/2010 Page 3 of 5
4
Motion to Stay
11.24.08 486 Couturier Denied, Dkt. 514
Motion for Emergency Stay of Arbitration
11.26.08 496 Plaintiffs No Decision as of Settlement
Emergency Motion for Stay, filed in the Ninth Circuit Court of Appeals, Nos. 08-17369, 08-17373, 08-17375, 08-17631
12.31.08 25 Couturier, Johanson
Denied, Dkt, 36
Motion to Hold Defendant Couturier in Civil Contempt and Schedule Trial Date
3.24.09 548 Plaintiffs Denied, Dkt. 573
Motion to Seal Couturier Accounting
3.25.09 550 Plaintiffs Granted, Dkt. 566
Motion to Compel Plaintiffs’ Discovery Responses and Deposition Testimony
6.19.09
568
Couturier Denied, Dkt. 607
Motion Extending the Time Limits for the Depositions of Couturier and Johanson, and Completing Johanson’s Deposition Before Magistrate
7.6.09 574 Plaintiffs Granted in Part, Dkt. 607
Motion for Ruling Adverse to Plaintiffs’ Regarding Pending Discovery Motions
7.23.09 590 Couturier Denied, Dkt. 593
Motion to Amend Stipulated Protective Order
8.31.09 610 Plaintiffs Denied as Moot, Dkt. 636
Motion for Partial Summary Judgment
9.2.09 612 Plaintiffs Morrell and Stanton
No Decision as of Settlement
Case 2:05-cv-02046-RRB-GGH Document 735-3 Filed 01/19/2010 Page 4 of 5
5
Objection to Magistrate Judge’s August 21, 2009 Order
9.8.09 616 Couturier No Decision as of Settlement
Motion to Reset Discovery and Trial Dates
9.8.09 617 Couturier Granted and Denied in Part, Dkt. 638
Motion to Fix Date for Expert Disclosure
9.22.09 634 Plaintiffs No Decision as of Settlement
Motion to Continue Trial Date and Discovery Deadlines
9.29.09 641 Johanson Granted and Denied in Part, Dkt. 687
Motion to Compel Production of Full Accounting
10.21.09 699 Plaintiffs No Decision as of Settlement
Motion to Compel Discovery From Defendants
10.22.09 701 Plaintiffs No Decision as of Settlement
Case 2:05-cv-02046-RRB-GGH Document 735-3 Filed 01/19/2010 Page 5 of 5
Exhibit 3 Depositions
Deponent Date of Deposition Noticed By Mark Comfort October 14, 2009 Defendants Clair R. Couturier, Jr. April 17, 2009 Plaintiffs Matthew Donnelly April 24-25, 2008 Plaintiffs Robert Eddy May 21, 2008 Plaintiffs David B. Fenkell February 12, 2008 Plaintiffs David Heald October 30, 2009 Defendants David Johanson June 2-3, 2009 Plaintiffs Gregory Johnson May 8, 2008 Defendants Dennis Locke November 6-7, 2008 Plaintiffs Anthony Mathews January 14, 2009 Plaintiffs Thomas J. McIntosh November 12-13, 2007 Plaintiffs Daniel Mytels May 6-7, 2008 Plaintiffs William Rodwell October 14, 2009 Defendants James Roorda November 19, 2007
June 4, 2009 Plaintiffs
Darleen Stanton May 22, 2008 Defendants
Case 2:05-cv-02046-RRB-GGH Document 735-4 Filed 01/19/2010 Page 1 of 1
Case 2:05-cv-02046-RRB-GGH Document 735-5 Filed 01/19/2010 Page 1 of 32
Case 2:05-cv-02046-RRB-GGH Document 735-5 Filed 01/19/2010 Page 2 of 32
Case 2:05-cv-02046-RRB-GGH Document 735-5 Filed 01/19/2010 Page 3 of 32
Case 2:05-cv-02046-RRB-GGH Document 735-5 Filed 01/19/2010 Page 4 of 32
Case 2:05-cv-02046-RRB-GGH Document 735-5 Filed 01/19/2010 Page 5 of 32
Case 2:05-cv-02046-RRB-GGH Document 735-5 Filed 01/19/2010 Page 6 of 32
Case 2:05-cv-02046-RRB-GGH Document 735-5 Filed 01/19/2010 Page 7 of 32
Case 2:05-cv-02046-RRB-GGH Document 735-5 Filed 01/19/2010 Page 8 of 32
Case 2:05-cv-02046-RRB-GGH Document 735-5 Filed 01/19/2010 Page 9 of 32
Case 2:05-cv-02046-RRB-GGH Document 735-5 Filed 01/19/2010 Page 10 of 32
Case 2:05-cv-02046-RRB-GGH Document 735-5 Filed 01/19/2010 Page 11 of 32
Case 2:05-cv-02046-RRB-GGH Document 735-5 Filed 01/19/2010 Page 12 of 32
Case 2:05-cv-02046-RRB-GGH Document 735-5 Filed 01/19/2010 Page 13 of 32
Case 2:05-cv-02046-RRB-GGH Document 735-5 Filed 01/19/2010 Page 14 of 32
Case 2:05-cv-02046-RRB-GGH Document 735-5 Filed 01/19/2010 Page 15 of 32
Case 2:05-cv-02046-RRB-GGH Document 735-5 Filed 01/19/2010 Page 16 of 32
Case 2:05-cv-02046-RRB-GGH Document 735-5 Filed 01/19/2010 Page 17 of 32
Case 2:05-cv-02046-RRB-GGH Document 735-5 Filed 01/19/2010 Page 18 of 32
Case 2:05-cv-02046-RRB-GGH Document 735-5 Filed 01/19/2010 Page 19 of 32
Case 2:05-cv-02046-RRB-GGH Document 735-5 Filed 01/19/2010 Page 20 of 32
Case 2:05-cv-02046-RRB-GGH Document 735-5 Filed 01/19/2010 Page 21 of 32
Case 2:05-cv-02046-RRB-GGH Document 735-5 Filed 01/19/2010 Page 22 of 32
Case 2:05-cv-02046-RRB-GGH Document 735-5 Filed 01/19/2010 Page 23 of 32
Case 2:05-cv-02046-RRB-GGH Document 735-5 Filed 01/19/2010 Page 24 of 32
Case 2:05-cv-02046-RRB-GGH Document 735-5 Filed 01/19/2010 Page 25 of 32
Case 2:05-cv-02046-RRB-GGH Document 735-5 Filed 01/19/2010 Page 26 of 32
Case 2:05-cv-02046-RRB-GGH Document 735-5 Filed 01/19/2010 Page 27 of 32
Case 2:05-cv-02046-RRB-GGH Document 735-5 Filed 01/19/2010 Page 28 of 32
Case 2:05-cv-02046-RRB-GGH Document 735-5 Filed 01/19/2010 Page 29 of 32
Case 2:05-cv-02046-RRB-GGH Document 735-5 Filed 01/19/2010 Page 30 of 32
Case 2:05-cv-02046-RRB-GGH Document 735-5 Filed 01/19/2010 Page 31 of 32
Case 2:05-cv-02046-RRB-GGH Document 735-5 Filed 01/19/2010 Page 32 of 32
Case 2:05-cv-02046-RRB-GGH Document 735-6 Filed 01/19/2010 Page 1 of 2
Case 2:05-cv-02046-RRB-GGH Document 735-6 Filed 01/19/2010 Page 2 of 2
Case 2:05-cv-02046-RRB-GGH Document 735-7 Filed 01/19/2010 Page 1 of 3
Case 2:05-cv-02046-RRB-GGH Document 735-7 Filed 01/19/2010 Page 2 of 3
Case 2:05-cv-02046-RRB-GGH Document 735-7 Filed 01/19/2010 Page 3 of 3
1
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
Juli E. Farris (SBN 141716) KELLER ROHRBACK, L.L.P. 1201 Third Avenue, Suite 3200 Seattle, Washington 98101 Telephone: (206) 623-1900 Facsimile: (206) 623-3384 [email protected] Attorneys for Moving Plaintiffs Additional Counsel on Signature Page
UNITED STATES DISTRICT COURT EASTERN DISTRICT OF CALIFORNIA
SACRAMENTO DIVISION
GREGORY JOHNSON, et al., Plaintiffs, v. CLAIR R. COUTURIER, JR., et al., Defendants,
24. Plaintiffs’ Counsel also secured two separate preliminary injunctions to prevent
the individual Defendants from receiving from TEOHC advancement of fees and expenses
during the pendency of the lawsuit under various indemnification agreements and to protect
the constructive trust assets from dissipation by CRC during the pendency of the case as later
detailed in this Declaration.
25. In addition, Defendants filed multiple motions in this Court (Dkt. 486) and in the
Ninth Circuit (Dkt. 25) to stay trial court proceedings pending a ruling on appeal.
26. Plaintiffs’ Counsel worked feverishly and defeated each and every motion to stay.
27. The depositions taken by Plaintiffs and their use of experts, where necessary,
required substantial time commitment and advancement of costs.
Case 2:05-cv-02046-RRB-GGH Document 736 Filed 01/19/2010 Page 5 of 16
6
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
28. Plaintiffs’ Counsel traveled at great cost across the United States to conduct
depositions from Philadelphia to California.
29. These depositions included the appraisers (Dennis Locke and Matthew Donnelly),
the compensation consultant (Anthony Mathews), attorneys (Thomas McIntosh and David
Johanson), the accountant (James Roorda), the individual who engaged in negotiations to
purchase Noll Manufacturing (David Fenkell of Alliance Holdings), the deal broker (Dan
Mytels), and many others.
30. These depositions were all document intensive and required an extremely high
level of deposition preparation and document review.
31. The case also required experts at every turn, from legal ethics experts for the
Disqualification Motion, a compensation consultant for the preparation of Plaintiffs’ expert
report, appraisal consultants and ERISA and tax experts for assistance in connection with
Plaintiffs’ motion for summary judgment filed in 2009 and negotiation of the settlement
agreement executed by the parties.
32. CRC received benefits totaling approximately $34 million from the 2004
transaction, including $26 million in cash transferred into an IRA in 2004 and 2005, the Palm
Desert Property, and $2.7 million to pay CRC’s taxes on the Palm Desert Property and the
Bentley automobile, inter alia. A small fraction of those benefits were proper compensation
to CRC for the repurchase of his ESOP shares and his deferred compensation due and owing
under a Compensation Continuation Agreement, which obligations were created prior to any
of the claims at issue.
33. While Plaintiffs always believed that Plaintiffs would obtain a judgment in the
range of $25 million or more, the depressed stock market and economy since 2006 rendered
Case 2:05-cv-02046-RRB-GGH Document 736 Filed 01/19/2010 Page 6 of 16
7
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
collection of that amount highly unlikely. In fact, by November 2009, CRC’s liquid assets
remaining from the transfer of $26 million to his IRA had been substantially dissipated.
Continuation of the lawsuit to trial would have further dissipated the assets in the IRA by
defense costs and CRC’s living expenses with respect to both his Gig Harbor home in
Washington and the Palm Desert Property.
34. Plaintiffs’ Counsel were concerned that these liquid assets could easily have been
further diminished by $3-5 million by the time a trial was completed and judgment was
entered.
35. Plaintiffs also recognized the risk that the Internal Revenue Service could easily
take the position that any amounts in the IRA were taxable to CRC as of 2004, on the ground
that “roll-over treatment” claimed by CRC was not appropriate. Had that occurred, tax,
penalties and interest could have easily exceeded the current value of the constructive trust
assets.
36. KR and Mr. Devine not only obtained an injunction of the payment of defense
costs, but as part of the Settlement the individual Defendants agreed to waive any claims they
had against TEOHC. This included CRC’s agreement to eliminate the indebtedness of
$ 1,534,248.00 million from TEOHC to CRC’s IRA which arose in connection with the
CRC’s buyout in 2004.
37. KR and Mr. Devine took similar actions when they learned that CRC’s brother,
Bruce Couturier, had filed an arbitration with TEOHC (“Bruce Couturier arbitration”) and
was attempting to collect over $4 million from the Gibraltar proceeds to pay Bruce Couturier
for excessive compensation and options promised by CRC to encourage Bruce Couturier as a
Case 2:05-cv-02046-RRB-GGH Document 736 Filed 01/19/2010 Page 7 of 16
8
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
TEOHC Director and/or as an ESOP participant to approve certain of the payments to CRC
from the 2004 transaction and not to object to CRC’s buyout.
38. After trying unsuccessfully to intervene in the Bruce Couturier arbitration,
Plaintiffs’ Counsel filed an ERISA lawsuit against Bruce Couturier styled Darleen Stanton
and Kelly Morrell v. Bruce P. Couturier, Case No. 2:09-cv-00519 (“Bruce Couturier District
Court Action”), currently pending in this Court.
39. Bruce Couturier’s motion to dismiss the complaint was recently denied.
40. The Bruce Couturier District Court Action was filed to protect the interests of the
ESOP by reason of ERISA violations including breach of fiduciary duty and engaging in a
prohibited transaction.
41. I also worked closely with TEOHC counsel (Cynthia Larsen) in connection with
the arbitration hearing which resulted in a decision in favor of Bruce Couturier for the amount
of only $332,660.96 in cash or 4,296.28 shares of TEOHC stock. Bruce Couturier has other
claims in arbitration which have yet to be decided, but these claims are insignificant and are
not likely to materially affect the award.
42. I intend to continue their representation to protect the Gibraltar proceeds from
Bruce Couturier’s claims and, if necessary, will vigorously pursue this litigation for the
benefit of the ESOP and protection of ESOP assets.
43. KR and MR. Devine, together with TEOHC’s counsel, were successful in
obtaining a preliminary injunction from this Court enjoining Bruce Couturier from obtaining
advancement of his legal fees and expenses in the Bruce Couturier District Court Action.
Case 2:05-cv-02046-RRB-GGH Document 736 Filed 01/19/2010 Page 8 of 16
9
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
44. Many of the ESOP participants here are retirees or persons out of work and thus
undoubtedly suffering significant financial hardships in the economic turmoil of 2006 through
the present.
45. Prompt distribution of a significant portion of the allocable share of the recovery in
this case will provide a meaningful benefit beyond the dollar amount recovered.
46. It will provide liquidity for ESOP participants in immediate need of the funds and
reduced financial anxiety for many others.
47. Plaintiffs’ Counsel accepted this matter on a contingent basis with the enormous
risk that counsel would receive no fee or expense reimbursement.
48. To date no objections to the requested fee have been received from ESOP
participants or beneficiaries; however, CRC’s brother, Bruce Couturier, has filed a notice of
his intent to file an objection to the settlement. Moreover, neither TEOHC nor the ESOP
opposes the requested fee award.
49. I am a 1971 graduate of the Ohio State College of Law and have practiced in the
field of complex business litigation for over 38 years. During that period, I have been
admitted pro hac vice as lead counsel in Federal District Courts venued in ten states.
50. I have practiced for over 18 years in the highly specialized field of ERISA law,
with almost 16 of those years handling litigation involving employee stock ownership plans.
51. I have served as lead counsel for ESOP participants in litigation involving breach
of fiduciary and prohibited transactions in district courts in the states of New York, New
Jersey, Ohio, Illinois, Missouri, Oregon, and California.
52. I have personally tried five ESOP cases to conclusion and obtained judgment for
the ESOP participants in four of the cases: Henry v. Champlain Enterprises (N.D. New York
2004); Roberts v. Tausig (N.D. of Ohio 2000); Shephard v. Dorsa (C.D. of California 1997),
and Mohler v. Unger (W.D. of Ohio 1995).
Case 2:05-cv-02046-RRB-GGH Document 736 Filed 01/19/2010 Page 9 of 16
10
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
53. I have also served as an expert witness and national speaker at ESOP conventions
on the subject of ESOP fiduciary litigation.
54. Terence Devine, counsel for Plaintiff Rodwell, is also experienced in ESOP
litigation, holds his Masters of Law in Taxation, and served as co-counsel with Shayne &
Greenwald in Henry v. Champlain Enterprises.
55. In handling this litigation, KR and Mr. Devine worked closed to optimize
efficiency and minimize cost whenever possible.
56. At depositions and hearings before the Court, I was the sole representative of
Plaintiffs present for KR and its clients, Plaintiffs Johnson, Rangel, Morrell, and Stanton.
57. Moreover, in several instances, Mr. Devine and I attended depositions by phone to
avoid excessive travel expense.
58. In connection with conducting depositions and preparing legal briefs, Mr. Devine
and I avoided duplication by sharing the responsibility with each other.
59. I took the responsibility for conducting the depositions of McIntosh, Roorda,
Mytels, Donnelly, Comfort, Heald, Eddy, and Locke, while Mr. Devine took responsibility for
conducting the depositions of Fenkell and Matthews.
60. With respect to the key witnesses, Defendants CRC, and Johanson, Mr. Devine
and I shared responsibility for conducting those depositions with no overlap of subject matter.
61. Mr. Devine and I achieved significant efficiencies by sharing the responsibility for
all brief writing with virtually no overlap.
62. I prepared for and conducted depositions, researched and prepared all motions and
memoranda after discovery commenced, with the assistance of one KR paralegal. From time
to time I was assisted by other KR lawyers and paralegals on a limited basis as was necessary.
63. Mr. Devine was assisted by almost no one else within his firm, but rather relied on
the associates, paralegals and support staff of at KR.
64. Moreover, even in key depositions of the individual Defendants, the examinations
were divided between Mr. Devine and I on a time-line basis.
Case 2:05-cv-02046-RRB-GGH Document 736 Filed 01/19/2010 Page 10 of 16
11
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
65. With respect to the extensive brief to the Ninth Circuit, Mr. Devine and I assumed
responsibilities for different issues to avoid unnecessary duplication of efforts.
66. These efforts enabled us to deal with the complexity of the case, the voluminous
documents, and the extended period of time involved on a complementary (as opposed to
redundant) basis.
67. At the time of the asset sale to Gibraltar Industries, ESOP participants had two
separate sources for distribution of Plan assets: (1) the net proceeds from the Gibraltar asset
purchase after payment of creditors, estimated at $15-20 million (approximately $11 million
of which is still held by TEOHC), and (2) the proceeds of a recovery in this lawsuit.
68. TEOHC maintained an insurance policy in the amount of $5,000,000 to protect the
directors and fiduciaries from ERISA liability.
69. This policy was used to pay Defendants’ expenses of contesting this action.
70. By mid 2008, however, the policy was exhausted by the payment of Defendants’
fees and expenses.
71. In May 2008, I became aware that Defendants were going to claim that ongoing
defense expenses should be paid by TEOHC under a series of indemnification agreements
between TEOHC and the individual Defendants.
72. When I learned of what I believed to be a “sweetheart arbitration” pending in
California to determine the applicability of the indemnification agreements, I took steps to
cause Plaintiffs to intervene in the arbitration. We recognized that TEOHC’s defense in the
arbitration was infected by the same type of conflicts of interest that infected the transactions
at issue here, because Defendants themselves had control and/or substantial influence over
TEOHC.
Case 2:05-cv-02046-RRB-GGH Document 736 Filed 01/19/2010 Page 11 of 16
12
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
73. Efforts at intervention were denied, and I became aware that the arbitration
decision was going to be rendered without a hearing, on submission, in the third week of
September 2008.1
74. TEOHC still held approximately $12 million in cash from the Gibraltar
transaction, but no one was taking steps to preserve those funds for the ESOP.
75. Since neither the Department of Labor nor the special fiduciary for the ESOP took
any action to protect the Gilbraltar proceeds for the ESOP, KR and Mr. Devine stepped
forward on their own initiative, at yet increased cost and risk, to be guardian of the ESOP’s
assets.
76. I believed that if Defendants were given access to that money, the entire amount
would ultimately be exhausted by the payment of Defendants’ litigation expenses.
77. Although the funds held in TEOHC were not a part of the claims asserted in this
action, they did constitute funds that would have been paid to the ESOP participants but for
the pendency of this litigation.
78. Use of the funds for defense costs would not only further damage the ESOP, it
would also in all likelihood prolong the litigation.
79. If the Defendants were expending the ESOP’s money to defend themselves,
Defendants would have no incentive to accept responsibility and settle the litigation.
80. To prevent the use of corporate funds for indemnity, an order to show cause was
brought seeking a temporary restraining order and a preliminary injunction enjoining the
payment of defense fees and expenses sought under the indemnification agreements.
81. The order to show cause was presented in Sacramento on September 18, 2009.
82. The Order granting the Order to Show Cause and Temporary Restraining Order
was signed on September 19, 2008. (Dkt. 367)
1 In fact the arbitration decision authorized the indemnification payments the day before the issuance of the temporary restraining order, but such payment was enjoined as a direct result of the efforts of Plaintiffs’ Counsel.
Case 2:05-cv-02046-RRB-GGH Document 736 Filed 01/19/2010 Page 12 of 16
13
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
83. The order granting Plaintiffs’ request for a Preliminary Injunction was granted on
September 29, 2008.2 (Dkt. 398)
84. Defendants appealed the granting of the injunction to the Ninth Circuit Court of
Appeals.
85. The Preliminary Injunction proceedings and appeal resulted in amicus briefs being
submitted by a group of banks and trust companies in support of Defendants and by the
Department of Labor in support of Plaintiffs.
86. After extremely extensive briefing, the appeal was argued in San Francisco on
May 7, 2009.
87. By a lengthy decision issued on July 27, 2009, the Ninth Circuit affirmed the order
granting the injunction, upholding the position asserted by Plaintiffs on almost every issue.
88. The Ninth Circuit specifically found that Plaintiffs were likely to succeed in the
action and that the indemnification agreements violated ERISA.
89. Significantly, Plaintiffs’ remarkable efforts led to a landmark appellate decision by
the Ninth Circuit which overruled every defense argument and decided each critical legal
issue on the merits in Plaintiffs’ favor.
90. The Ninth Circuit’s Opinion in this case has received widespread attention in the
legal community, and was reported in detailed articles in West Publishing’s ERISA Litigation
Reporter and BNA’s Pension & Benefits Reporter.
91. Because the proceeds of the Gibraltar transaction were not covered by the claims
asserted in the actions and the assets protected are not part of the common fund paid under the
2 Plaintiffs subsequently requested and were granted a Preliminary Injunction against Defendant CRC enjoining him with respect to the use of the “Constructive Trust Assets.” (Dkt. 450) Those assets were subject to Plaintiffs’claim in this action. They serve as a source of the funding of the Settlement, but the injunction did not result in payment or protection of assets not covered by the claim. Thus, there is no separate application for fees with respect to that injunction.
Case 2:05-cv-02046-RRB-GGH Document 736 Filed 01/19/2010 Page 13 of 16
14
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
Settlement, Counsel should be compensated for assuming the responsibility of protecting the
ESOP.
92. The issues involved in the request of injunction and the appeal were extremely
complex, as evidenced by the fact that amicus briefs were submitted on behalf of both parties.
93. They involved not only ERISA and state law issues, but dealt with important
public policy considerations.
94. Moreover, the injunction and appeal were aggressively pursued by KR and Mr.
Devine parallel to our efforts to move the litigation promptly to trial.
95. The granting of the injunction and the successful defense of the appeal resulted in
very substantial benefits to the ESOP.
96. It prevented the use of corporate funds for an improper indemnification, and, for
the first time in the litigation, caused the breaching parties to assume the financial burdens of
their defense.
97. It is likely that this was a precipitating factor leading to the Settlement.
98. TEOHC was holding approximately $12 million, all of which was potentially
subject to claims of indemnification.
99. I believe that to date, had the injunction not been entered, the indemnity paid to
Defendants would be in excess of $4,500,000. 100. On October 15, 2008, Plaintiffs moved for a Temporary Restraining and
Preliminary Injunction (Dkt. 407) to impose a constructive trust upon the assets which CRC
received from TEOHC and the ESOP as a result of the 2004 buyout transaction, and enjoin
the dissipation or transfer of the assets during the pendency of this case.
101. The Court granted the Motion (Preliminary Injunction II) and ordered CRC to
provide Plaintiffs with an accounting (Dkt.450).
102. In October 2009, in the related case of Darleen Stanton and Kelly Morrell v.
Bruce P. Couturier, Case No. 2:09-cv-00519, this Court also granted the motion for
Case 2:05-cv-02046-RRB-GGH Document 736 Filed 01/19/2010 Page 14 of 16
15
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
temporary restraining order and preliminary injunction filed by TEOHC and supported by
Plaintiffs, enjoining TEOHC from advancing to CRC’s brother, Bruce Couturier, his legal
fees and expenses in that case pending final disposition.
103. Defendants appealed the granting of Preliminary Injunction II to the Ninth
Circuit Court of Appeals at the same time they had appealed Preliminary Injunction I.
104. The Court of Appeals affirmed, finding for Plaintiffs on essentially all issues
relating to Preliminary Injunction I and II. Defendants’ request for a rehearing at the Ninth
Circuit en banc was denied.
105. From January 1, 1994, through September 30, 2006, I was a 50% owner of the
law firm Shayne & Greenwald (“S&G”) in Columbus, Ohio and its chief litigation partner.
Stanley Shayne (“Shayne”) was the other 50% owner of S&G and its chief business partner.
106. During the period of November 22, 2004, through September 30, 2006, S&G
attorneys performed legal services in behalf of the Noll Manufacturing ESOP and TEOHC
ESOP which involved investigating ERISA claims against CRC, Johanson, and Eddy, and
thereafter filing a lawsuit and prosecuting the claims.
107. I served as primary litigation counsel on behalf of S&G and managed the
litigation. I have firsthand knowledge of all work performed at S&G.
108. On September 30, 2006, Shayne and I separated our law practices and ceased
operating as S&G.
109. After October 1, 2006, I continued to represent Plaintiffs Gregory Johnson,
Edward Rangel, and Kelly Morrell (“Johnson Plaintiffs”), while Shayne represented Plainitff
William Rodwell (“Rodwell”).
110. I collaborated with the law firm of Keller Rohrback in representing the
Johnson Plaintiffs effective October 1, 2006. During the period October 1, 2006, through
December 31, 2006, I performed services on behalf of the Johnson Plaintiffs through my new
firm Greenwald & Associates in Columbus, Ohio.
Case 2:05-cv-02046-RRB-GGH Document 736 Filed 01/19/2010 Page 15 of 16
16
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
111. Effective January 1, 2007, I moved to Phoenix, Arizona and joined the law
firm of Keller Rohrback, PLC (“KR”) as of counsel. From that date forward, all of my
services on behalf of the Johnson Plaintiffs were recorded and invoiced by KR.
112. As primary litigation counsel throughout this matter, I have full and firsthand
knowledge of the efforts of all counsel in this litigation and which services were necessary
and contributed to value for the ESOP and its participants.
113. In connection with the preparation of the Fee Application, I have reviewed the
time and expense records of S&G and Greenwald & Associates. After eliminating any time
which was reasonably determined to be either unnecessary or not contributing to value on
behalf of the ESOP and its participants, I have determined that Exhibit 1 and 2 hereto
represent Plaintiffs’ Counsel’s “lodestar” in this matter for S&G and Greenwald &
Associates. The hourly rates set forth in Exhibits 1 and 2 are the rates that were charged by
S&G and Greenwald & Associates, respectively, and are consistent with rates charged in the
community in which Shayne & Greenwald and Greenwald & Associates practiced.
114. I have also determined that the expenses of S&G, appearing on Exhibit A
attached hereto, were reasonable and necessary expenses that benefitted this litigation.
I declare under penalty of perjury under the laws of the United States of America that
the foregoing is true and correct. This Declaration was executed this 19th day of January,
2010, at Phoenix, Arizona.
By: _/s/ Gary D. Greenwald_______________
Case 2:05-cv-02046-RRB-GGH Document 736 Filed 01/19/2010 Page 16 of 16
Exhibit 1 Noll Maufacturing Company
ERISA Litigation Report
Lodestar Analysis
Firm Name: Shayne & Greenwald
Reporting Period: November 1, 2004 – September 30, 2006
Timekeeper Hours Rate Lodestar Gary Greenwald 174.35 $450 $ 78,457.50 Stanley Shayne 189.25 $450 $ 85,162.50 Anne Marie LaBue 679.85 $350 $ 237,947.50 Phil Nichols 222.00 $350 $ 77,700.00 Michele Dudley .50 $250 $ 125.00 Christopher Pettit 38.35 $250 $ 9,587.50 Steve Geise 81.05 $210 $ 17,020.50 John Ernest 62.50 $180 $ 11,250.00 Thomas Rocco 28.25 $215 $ 6,073.75 Miriam Forian 38.30 $200 $ 7,760.00
Totals 1,514.9 $ 531,084.25
Case 2:05-cv-02046-RRB-GGH Document 736-2 Filed 01/19/2010 Page 1 of 1
Exhibit 2 Noll Maufacturing Company
ERISA Litigation Report
Lodestar Analysis
Firm Name: Greenwald & Associates
Reporting Period: October 1, 2006 – December 31, 2006
Timekeeper Hours Rate Lodestar Gary Greenwald 33.25 $450 $ 14,962.50
Case 2:05-cv-02046-RRB-GGH Document 736-3 Filed 01/19/2010 Page 1 of 1
Exhibit 3 Noll Maufacturing Company
ERISA Litigation Report
Expense Report
Firm Name: Shayne & Greenwald
Reporting Period: November 1, 2004 – September 30, 2006
Service Amount Outside Duplicating $ 221.59 Filing and Other Fees $ 605.00 Telephone $ 640.25 Federal Express $ 673.98 Copies $ 3,387.85 Travel and Meals $ 3,524.44 Printing $ 5,653.72 Telecopy $ 196.52 Postage $ 33.99 Expert Witness Fees $ 5,000.00 Professional Fees $ 4,781.75 Pacer/Computer Research $ 5,878.32 Courier $ 18.71 Other Costs $ 147.99
Total $ 30,764.11
Case 2:05-cv-02046-RRB-GGH Document 736-4 Filed 01/19/2010 Page 1 of 1
DEVINE, MARKOVITS & SNYDER, LLP Terence J. Devine 52 Corporate Circle Albany, NY 12203 Telephone: (518) 464-0640 Facsimile: (518) 464-0200 [email protected] Matthew Righetti RIGHETTI LAW FIRM, P.C. 456 Montgomery Street, Suite 1400 San Francisco, CA 94104 Telephone: (415) 983-0900 Facsimile: (415) 397-9005 Attorneys for Plaintffs Additional Counsel on Signature Page
UNITED STATES DISTRICT COURT EASTERN DISTRICT OF CALIFORNIA
SACRAMENTO DIVISION
GREGORY JOHNSON, et al., Plaintiffs, vs. CLAIR R. COUTURIER, JR., et al. Defendants.
│││││││││││││││││
Case No. 2:05-cv-02046-RRB KJM DECLARATION OF TERENCE J. DEVINE IN SUPPORT OF APPLICATION FOR ATTORNEYS’ FEES AND EXPENSES
Case 2:05-cv-02046-RRB-GGH Document 737 Filed 01/19/2010 Page 1 of 13
DARLENE STANTON, Plaintiffs, vs. CLAIR R. COUTURIER, JR., et al. Defendants.
│││││││││││││││││
No. 2:05-cv-01208-WBS-JFM (Consolidated under 2:05-cv-02046-RRB KJM)
I, Terence J. Devine, declare:
1. I am an attorney duly licensed to practice law before all of the Courts of the State of
New York, the United States District Courts for the Southern and Northern District of New
York, and the Second Circuit Court of Appeals. I am also admitted pro hac vice to this Court for
purposes of this case.
2. I am a partner in the law firm of Devine, Markovits & Snyder, LLP, (hereinafter
referred to as “Devine”), co-counsel of record (along with Shayne Nichols, LLC, hereinafter
“Shayne”) for Plaintiff William Rodwell in the above captioned matter (the “Action”). Prior to
the formation of Devine in September 2007, I was a partner in the law firm of DeGraff, Foy,
Kunz & Devine, LLP (now known as DeGraff, Foy & Kunz, LLP, hereinafter referred to as
“DeGraff”) until August 31, 2007.
3. I have been personally involved in all phases of the Action from the time DeGraff
was originally retained in September 2006 until present.
4. I have been personally involved in pleadings, development of the case in its
Case 2:05-cv-02046-RRB-GGH Document 737 Filed 01/19/2010 Page 2 of 13
investigation stage, all motion practice, discovery and depositions, the appeal in the Ninth
Circuit Court of Appeals, mediation conferences, trial preparation and the ultimate negotiation
and proposed documentation of the proposed settlement of the Action.
5. The following information is based upon my own personal knowledge and, if called
upon to testify, I could and would testify competently as set forth herein.
6. I submit the Declaration in support of Plaintiffs’ Counsels’ Application for Attorneys’
Fees and Expenses.
7. Following hotly contested litigation over several years, the parties negotiated a
Settlement Agreement which was filed with this Court on January 5, 2010 with the Motion for
Preliminary Approval of the Settlement (Dkt. 728).
8. Pursuant to the Settlement Agreement, Plaintiffs’ Counsel are to apply for the
approval of attorneys’ fees and expenses under the common fund doctrine.
9. Counsel is applying for fees in the amount of 33 1/3% of the net recovery paid into
the Settlement Fund for the benefit of the ESOP in the Action, plus $450,000 for extraordinary
services protecting existing assets of TEOHC by securing an injunction against payment by
TEOHC of Defendants’ attorney fees under certain indemnification agreements, as well as
successfully defending an appeal of the injunction in the Ninth Circuit Court of Appeals.
10. In addition, Counsel are applying for a reimbursement of expenses incurred in
prosecuting the action.
11. The fee requested is reasonable given the result to the ESOP and the
extraordinary efforts of Counsel.
12. In preparation for making the Application for Attorneys’ Fees and Expenses, I
Case 2:05-cv-02046-RRB-GGH Document 737 Filed 01/19/2010 Page 3 of 13
personally reviewed the time entries for efforts by DeGraff in the Action prior to September
2007, the time records of Devine since its formation on September 1, 2007 and the time entries
of Shayne since October 1, 2006.
13. Each of the hours submitted in support of this motion was reasonable and
necessary to the proper prosecution of the Action on behalf of the ESOP. I have eliminated any
time that I did not consider appropriate. Such exclusions include time prior to my formal
retention in the Action, excess time incurred in my “getting up to speed” because of being
retained after commencement of the Action, and time which was redundant or which did not
contribute in any way to the prosecution of the Action. I have also excluded time of Shayne
which was redundant with time of trial counsel.
14. I have also reviewed the expense entries chargeable to this Action by DeGraff,
Devine and Shayne. All of such expenses submitted herewith were reasonable and necessary in
connection with the prosecution of the Action. Again, I have eliminated all expenses for
DeGraff prior to formal retention and expenses which are not appropriate for reimbursement.
15. The schedule attached hereto as Exhibit A is a summary of time spent by me while I
was with DeGraff and a summary of DeGraff’s expenses on this matter. The lodestar
calculation is based upon the rate of $400 per hour. At the time I left DeGraff my normal hourly
rate was $275 to $300 per hour. A higher rate is used herein because of the complexity of
ERISA litigation and the fact that this case was handled on a contingency. The schedule was
prepared from contemporaneous, daily time records prepared and maintained by my former firm.
16. The total number of hours expended on this litigation by DeGraff through August 31,
2007 is 155.10 hours. The total lodestar for DeGraff is $62,040.
Case 2:05-cv-02046-RRB-GGH Document 737 Filed 01/19/2010 Page 4 of 13
17. The expenses for DeGraff total $6,044.06. These expenses were necessarily incurred
by DeGraff in relation to this litigation.
18. The schedule attached hereto as Exhibit B is a summary of time spent by Devine
(exclusive of time on Preliminary Injunction I and the appeal to the Ninth Circuit Court of
Appeals) and a summary of my expenses through December 31, 2009 on this matter. The
lodestar is based upon the rate of $500.00 for me and $150.00 for my assistant, Michael Bruno.
My normal hourly rate is $325.00 to $350.00. I am paid $500.00 per hour on an hourly basis for
clients in California. As will be set forth below, the higher rate is justified because of the type of
work involved. My assistant is billed at $150 per hour. The schedule was prepared from
contemporaneous, daily time records prepared and maintained by my firm.
19. The total number of hours expended on this litigation by my firm is 2559.80 hours.
The total lodestar for my firm is $1,229,325.00.
20. The expenses of my firm in this litigation total $49,382.59. These expenses were
necessarily incurred by my firm in relation to this litigation.
21. The schedule attached hereto as Exhibit C is a summary of the time of my firm in
relation to the securing for Preliminary Injunction I and the successful defense of the appeal to
the Ninth Circuit Court of Appeals. This time is separately accounted for as part of Counsel’s
application for a separate fee for these issues. The schedule was prepared from
contemporaneous, daily time records prepared and maintained by my firm. The lodestar value is
based on the rate of $500 per hour.
22. The total number of hours expended by my firm with respect to Preliminary
Injunction I and the appeal is 243.5 hours. The total lodestar for my firm on this matter is
$121,750.
Case 2:05-cv-02046-RRB-GGH Document 737 Filed 01/19/2010 Page 5 of 13
23. The schedule attached hereto as Exhibit D is a summary of time reported by Shayne
Nichols, LLC and a summary of the Shayne Nichols expenses through December 31, 2009.
Shayne Nichols reported total hours of 1,097.35 and rates from $150.00 to $650.00 per hour.
The schedule was prepared from contemporaneous, daily time records prepared and maintained
by Shayne Nichols, LLC
24. Counsel recognizes that services reported by Shayne Nichols, LLC duplicated efforts
by trial counsel and that the rate charged should not exceed $500.00 per hour. For lodestar
purposes, counsel is including 320 hours with an effective rate of $ 416.67 per hour, for a total
lodestar of $137,500.
25. The expenses of Shayne Nichols, LLC in the litigation total $51,280.18. These
expenses were necessarily incurred by Shayne Nichols, LLC in relation to the litigation.
26. From the time of my involvement in the litigation, counsel has been acutely aware of
the need for efficiency in the expenditure of time to avoid duplication of efforts.
27. Prosecution of the action has involved multiple trips to Sacramento, San Francisco,
Seattle, Columbus and Phoenix, as well as trips to Philadelphia, Portland, Los Angeles and San
Diego.
28. Mr. Greenwald and I conducted and/or defended all of the depositions taken prior to
the Settlement of this Action. On several instances, however, I attended deposition by telephone
to minimize the time and expense involved.
29. Mr. Greenwald and I worked in tandem with our expert in connection with the expert
opinion provided to Defendants.
30. In addition to normal motion practice, we secured Preliminary Injunctions I and
Preliminary Injunction II.
31. After securing the preliminary injunctions, we successfully defended an appeal in the
Case 2:05-cv-02046-RRB-GGH Document 737 Filed 01/19/2010 Page 6 of 13
Ninth Circuit.
32. The securing of the injunctions and the success in the Ninth Circuit were critical in
preserving the value of the case and in ultimately effecting the proposed Settlement.
33. Although other counsel and I worked on the Action together on practically a daily
basis, efforts were made to avoid duplication of efforts.
34. For example, even with respect to depositions of Couturier and Johanson, the
Examination was divided between Mr. Greenwald and me based on various issues to avoid the
overlapping of services. The same approach was used in connection with briefing.
35. Work on the Action is not yet complete, even after approval of the Settlement there
will be significant work required relating to the sale of the Palm Desert property and the tax
refund detailed in the Settlement Agreement. This should result in at least 200 additional hours
to complete the matter in full. These hours have not been factored into the lodestar.
36. In making the Declaration, it is appropriate that I summarize some of my background
for the Court, inasmuch as experience of counsel is one of the factors considered by the Court in
determining fee applications.
37. I received my Juris Doctor degree, cum laude, from Albany Law School of Union
University in 1976, and I was admitted to practice in New York. I have practiced law
continuously in New York from February 1977 to the present. From March 1977 until
November 2009, I was also involved with drafting the New York State Bar Exam.
38. I received my LLM in Taxation from New York University in 1982.
39. Starting in 1977, I practiced extensively in the areas of business, tax, ERISA and
commercial litigation. I have been involved in all aspects of ESOPs, including drafting them,
prosecuting and defending litigation and dissolving them.
Case 2:05-cv-02046-RRB-GGH Document 737 Filed 01/19/2010 Page 7 of 13
40. In 2004, Greenwald and I tried an action on behalf of an ESOP in the Northern
District of New York (Henry et al v. Champlain Enterprises, et al. [Henry v. Champlain Ent.,
Inc. 334 F. Supp.2d 252 (N.D.N.Y. 2004)] (hereinafter “Henry”).
41. Following a bench trial in February and April 2004, the Court awarded Plaintiffs a
Judgment against U.S. Trust Company of California in the amount of nearly $16,000,000.
42. Henry has been to the Second Circuit Court of Appeals twice, with the Defendants
first appealing and, after an initial remand, on an appeal by Plaintiffs.
43. Most recently, I argued Henry in the Second Circuit in October 2008 and was
successful at securing a remand to District Court on June 19, 2009. ([Henry v. U.S. trust Co. of
Cal 569 F.3d 96 (2d Circuit 2009)]) The matter is still awaiting a new decision of the District
Court.
44. Approximately 40% of my practice in the past 2½ years has involved this case,
requiring that I forego a significant amount of other work.
45. ERISA is a complex statute, but the Employee Stock Ownership Plan (“ESOP”) area
of ERISA is particularly complex, because it often involves issues of prohibited transactions,
valuation of closely held corporations and circumstances where the Plan fiduciaries are also the
controlling officers, directors and shareholders.
46. With its extensive discovery and motion practice, this Action is a prime example of
the complexity and difficulties to be encountered in an ESOP case.
47. Because of the complexity of ERISA, the issues involved in the cases and the need to
extensively research in order to have a reasonable working knowledge of ERISA, there are a
small number of attorneys involved in representation of parties in ERISA actions on a regular
basis, and even fewer who are willing to assume the risks of representing plaintiffs in ERISA or
ESOP actions.
Case 2:05-cv-02046-RRB-GGH Document 737 Filed 01/19/2010 Page 8 of 13
48. Representation of plaintiffs in an ESOP case is made particularly difficult because of
the fact that plaintiff’s counsel is assuming the risk of never being compensated and defendants
are usually represented by large firms which are well compensated on a current basis.
49. It is my experience that the attorneys engaged in ERISA litigation matters can, and
often do, command hourly rates in excess of the hourly rates customarily charged for other
complex business litigations.
50. Such higher effective hourly rates are particularly appropriate in light of the risk
being taken in such a complex area of the law without any assurance of ultimate compensation.
51. The Settlement negotiated in the Action is excellent for the ESOP, given the fact that
the Defendants are individuals with limited means to satisfy a judgment.
52. The extent of the effort (as evidenced by over 10,000 hours of time and the favorable
result) by all of the Plaintiffs’ Counsel easily supports the application of Plaintiffs’ Counsel.
I declare under penalty of perjury under the laws of the United States of America that
the foregoing in true and that this Declaration is executed this 19th day of January, 2010.
/s/ Terence J. Devine Terence J. Devine, Declarant
Case 2:05-cv-02046-RRB-GGH Document 737 Filed 01/19/2010 Page 9 of 13
Exhibit A
Time & Expenses of
DeGraff, Foy, Kunz & Devine
Timekeeper Hours Rate Lodestar Terence J. Devine 155.10 $ 400.00 $ 62,040 Description of Expense Amount Filing Fees $ 180.00 Travel $ 5,864.06
Case 2:05-cv-02046-RRB-GGH Document 737 Filed 01/19/2010 Page 10 of 13
Exhibit B
Time and Expenses of
Devine Markovits & Snyder, LLP
Timekeeper Hours Rate Lodestar Terence J. Devine 2415.30 $ 500.00 $ 1,207,650 Michael Bruno 144.50 $ 150.00 $ 21,675
Total Lodestar $ 1,291,325 Description of Expenses Amount Photocopying $ 8,703.50 Reproduction of CD’s $ 584.69 Federal Express/Postage $ 1,135.11 Lexis Nexis $ 582.88 Travel $ 32,349.58 Pacer $ 408.96 Transcription Services $ 5,617.87 Total $ 49,382.59
Case 2:05-cv-02046-RRB-GGH Document 737 Filed 01/19/2010 Page 11 of 13
Exhibit C
Devine, Markovits & Snyder, LLP
Summary of time on Preliminary Injunction I and
Appeal to Ninth Circuit Court of Appeals Timekeeper Hours Rate Lodestar Terence J. Devine 243.5 $ 500.00 $ 121,750
Case 2:05-cv-02046-RRB-GGH Document 737 Filed 01/19/2010 Page 12 of 13
Exhibit D
Time & Expenses Reported by
Shayne Nichols, LLC
Timekeeper Hours Rate Total Stanley H. Shayne 778.25 $ 650.00 $ 505,862.50 Anne Marie LaBue 98.50 $ 550.00 $ 54,175.00 Philip R. Nichols 80.75 $ 350.00 $ 28,262.50 Aaron A. Bucco 43.40 $ 150.00 $ 6,509.88 Jessica A. Germain 43.00 $ 150.00 $ 6,500.00 Michelle R. Dudley 21.70 $ 250.00 $ 5,425.00 Thomas J. Rocco 31.75 $ 215.00 $ 6,826.25 Totals 1097.35 $ 613,561.13 Description of Expenses Amount Postage/Federal Express $ 443.66 Facsimiles $ 171.00 Travel & meals $ 26,295.97 Copying $ 1,247.12 Telephone $ 116.00 Printing $ 5,860.36 Expert Witness $ 10,881.75 Pacer/West $ 646.47 Transcription Services $ 5,617.85 Total $ 51,280.18
Case 2:05-cv-02046-RRB-GGH Document 737 Filed 01/19/2010 Page 13 of 13
