Fee award in Royal Ahold case tops $130M

Daily Record, The (Baltimore), Nov 29, 2006 by Barbara Grzincic

Lead counsel in the Royal Ahold securities class action is entitled to more than $130 million in attorneys' fees, a federal judge in Baltimore has ruled.

The award represents 12 percent of the $1.1 billion settlement reached in November 2005 and approved by U.S. District Judge Catherine C. Blake in June.

"Strictly on a percentage comparison approach, a 12% fee award appears to me a reasonable percentage of the class recovery," Blake decided this month. She also awarded $3.26 million in expenses, the full amount requested by the lead counsel, Andrew Entwistle of Entwistle and Cappucci in New York City.

In a separate development, parties to another aspect of the mammoth litigation have agreed to settle ERISA-based claims for $2.5 million, with a proposed fee award of $1.1 million. That settlement was filed in federal court on Monday and is subject to court approval.

A third aspect involving claims against accounting firms Deloitte & Touche U.S. and Deloitte & Touch Netherlands is still pending, with a hearing scheduled for next month, according to attorneys Andrew Radding and Gregory Kline of Adelberg Rudow Dorf and Hendler in Baltimore.

Those claims were dismissed earlier in the litigation, but an amended complaint has been filed, Kline said. The Deloitte claims were specifically omitted from the settlement, Blake noted in the attorneys' fee ruling.

Share the wealth?

It will now be up to Entwistle to determine how to divide the $130 million fee award among the scores of plaintiffs' lawyers involved in the national litigation.

Radding, who was appointed local lead counsel with Entwistle's backing, declined to discuss his firm's possible share but did say he was "very pleased" by Blake's ruling this month.

He referred all further requests for comment to Entwistle, who did not return a call for comment yesterday.

One lawyer who doesn't expect to see a dime is John J. Pentz III, whom Blake referred to as a "professional and generally unsuccessful objector."

Pentz represented Linda Tsai, a Massachusetts woman who opposed the settlement and sought to limit the lawyers' share to no more than 7.5 percent of the settlement fund.

"Lead counsel will share, but it's their prerogative," Pentz said yesterday. "They will determine who gets what, based on who advanced the case and who sat back and waited for a settlement. But objectors are never part of that group, short of a court order."

Blake found another objector, U.S. Trust Co. N.A., more "helpful." U.S. Trust, an independent fiduciary representing the ERISA plans, provided Blake with data to back up its claim that Entwistle's request for $163 million - 15 percent of the total - was excessive.

"U.S. Trust contends that as settlement amounts increase, percentage fee recovery decreases," Blake wrote, "and that in all cases involving settlements of $1 billion or more-, the awards have been less than 10 percent."

Mike Stenglein, an attorney for U.S. Trust, was quick to reject any implication that U.S. Trust was arguing for a bright-line approach.

"We didn't advocate a 10-percent limit," said Stenglein, managing partner of Dewey Ballantine in Austin, Texas. "We simply said, 'Here's the data; you, the court, have to decide.'"

In this case, he added, "each percentage point was worth $11 million."

Uninterpreted

The judge noted that the Private Securities Litigation Reform Act calls for "reasonable" attorneys' fees, and that the 4th U.S. Circuit Court of Appeals has not yet interpreted that provision of the act.

However, in 1978 the 4th Circuit set forth a 12-factor test for determining whether attorneys' fees were reasonable, in Barber v. Kimbrell's Inc.

"Application of the Barber factors- also supports an award of this magnitude," Blake wrote.

Among other things, "the global aspect of the case raised additional practical and legal complexities, as did the parallel criminal proceedings in another district," the judge noted; also, the settlement "is among the largest cash settlements ever in a securities class action case."

Blake also was comfortable with the "lodestar multiplier" the award represents.

The lodestar calculation considers the time spent on the case and the attorneys' billing rate. In this case, that yielded an undisputed total of more than $50.8 million. Multiplying that amount by 2.57 was reasonable to account for the risk, length and complexity of the litigation, she wrote.

Royal Ahold disclosed in 2003 that it had overstated its earnings by $1.1 billion over the previous three years, triggering the securities litigation that was consolidated in federal court in Baltimore.

Most of the misstatements were associated with Ahold's U.S. Foodservice unit, based in Columbia.

The Securities and Exchange Commission settled civil fraud charges against the company and top executives, although several criminal charges are still pending.

On Nov. 12, Ahold announced plans to sell U.S. Foodservice but keep its Giant Food grocery chain.