The Million Dollar Haircut: NC Business Court Reduces Fee Application In Wachovia/Wells Fargo Class Action
The lawyers who represented a class of Wachovia shareholders in the lawsuit over Wachovia's merger last year with Wells Fargo have gotten a ruling on their application for $1,975,000 in fees. Judge Diaz knocked that application down by over a million dollars -- or more than half of the fees sought -- to $932,621.98.
The Order today in Ehrenhaus v. Baker ruled that "the time spent by counsel on the case appears to be somewhat excessive," and that "the hourly rates of Plaintiff's New York counsel [of $750 per hour] are far in excess of those normally charged by attorneys in North Carolina."
I cannot tell you how the Court got to the $932,621.98 number because, as Judge Diaz observed, Plaintiff's counsel "did not submit detailed time records of the work done." But the fee application claimed 2,333 hours of work, which breaks down to an award of $399.75 per hour.
On a more serious note, there are two parts to the Order that may have more of a future precedential value. One is that Judge Diaz' ruling certified a non-opt-out class. In other words, class members didn't have the traditional right to opt out of the settlement and pursue their individual claims. The Court said that this type of certification was appropriate given that this was a lawsuit over a merger seeking primarily equitable relief. There are no appellate cases in North Carolina approving such a non-opt-out certification, although the Business Court has certified such classes before.
The other is the Court's consideration of the reaction of the class itself in determining that the settlement was adequate. Judge Diaz said that "the reaction of the class to the settlement is perhaps the most significant factor to be weighed in considering its adequacy." He noted that over a million class members had received notice of the settlement, but that only 51 had objected. He held that "the overwhelming majority of the Class has been virtually silent as to the Proposed Settlement," and that "the muted reaction of the Class . . . supports a finding that the Proposed Settlement is fair and reasonable."
I don't think this was the tacit approval that Judge Diaz thought it was. It's more likely to me that Wachovia's shareholders were just tired of the whole darn thing.