see - business law in virginia · [doc. no. 107]. upon consideration ... in re microstrategy, inc.,...

IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF VIRGINIA

Alexandria Division

IN RE STAR SCIENTIFIC, INC. DERIVATIVE LITIGATION

This Document Relates to:

ALL ACTIONS

) ) ) ) ) )

Lead Case No. I: 13cv0550 (AJT/JFA)

ORDER

This matter is before the Court on plaintiffs' Motion for an Award of Attorneys' Fees,

Reimbursement of Expenses, and Incentive Awards ("Motion for Fees, Expenses, and Awards")

[Doc. No. 107]. Upon consideration of the Motion for Fees, Expenses, and Awards, the

memoranda in support thereof and in opposition thereto, the supplemental records provided by

plaintiffs' counsel and related briefing, and for the reasons stated herein, the Motion for Fees,

Expenses, and Awards is GRANTED in part and DENIED in part. The Court awards fees and

expenses in the total amount of$532,019.89, consisting of$488,062.50 in attorneys' fees and

$43,957.39 in litigation expenses. The Court also approves a payment of a service award to each

individual plaintiff in the amount of $2,500, or a total amount of $10,000, to be paid out of the

fee and expense award of$532,019.89 pursuant to the Stipulation and Agreement of

Compromise, Settlement and Release. See [Doc. No. 82, Ex. A].

I. Background

The tactual and procedural history of this case is detailed in the Joint Declaration in

Support of the Motion for Final Approval of Settlement and Motion for Award of Attorneys'

Fees, Reimbursement of Expenses, and Incentive Awards. [Doc. No. 109] ("Joint Dec!.").

Case 1:13-cv-00550-AJT-JFA Document 119 Filed 08/03/16 of 17 PageID# 3545

Briefly summarized, this matter involves derivative actions in state and federal court,

filed on behalf of the shareholders of Star Scientific, Inc. ("Star Scientific" or "the Company"). 1

The federal derivative actions were filed on May 2, 2013 by William Skillman (the Skillman

action) and on May 3, 2013 by David Inloes (the Inloes action). [Joint Decl. ~ 21 ]. These

lawsuits alleged that defendants, while acting as members of Star Scientific's Board of Directors,

breached their fiduciary duties and violated Section 14(A) of the Securities Exchange Act. On

May 23,2013, these two cases were consolidated by agreement of the parties in accordance with

Federal Rule of Civil Procedure 42(a), and a Consolidated Shareholder Derivative Complaint

was filed on January 13, 2014. [/d. ~~ 22, 24].

On July 8, 2013, a state derivative action was filed by Harold Levine in Richmond City

Circuit Court, followed by another state derivative action filed by Louis Lim on July 9, 2013

in Henrico County Circuit Court. [/d. ~ 28]. Similar to the federal derivative actions, these

lawsuits alleged that defendants, while acting as members of Star Scientific's Board of Directors,

breached their fiduciary duties, wasted corporate assets, and were unjustly enriched. [/d.]. On

May 15, 2014, plaintiff Louis Lim and defendants jointly moved the Henrico County Circuit

Court to transfer Lim's case to the City of Richmond to facilitate consolidation. [/d.~ 30].

Following approval of this transfer, the state derivative actions were consolidated on August 21,

2014. [/d.~ 32].

Settlement negotiations initiated by plaintiffs' lead counsel in the state derivative actions

resulted in a series of mediation attempts that successfully resolved claims in both the state and

federal derivative actions. [ Id ~~ 34-41]. These efforts culminated in early December 20 14

when "the Parties reached an agreement in principle, with certain contingencies, including

1 On June II, 2014, the Company changed its name to Rock Creek Pharmaceuticals, Inc. For purposes of consistency, the Court will continue to refer to the Company by its former designation. See [Doc. No. Ill at n.2].

2


Confirmatory Discovery, providing for the settlement of the Derivative Actions ... [and] a

release of all claims in the Derivative Actions." [/d. ~ 42]. On January 27, 2015, the parties

executed a stipulation that provided for the resolution of claims in both the federal and state

derivative actions. [Id ~ 44]. Part of that settlement was an agreement that plaintiffs' lead

counsel in their respective matters would apply to this Court for an award of fees and expenses

with respect to both the federal and state derivative actions.2

On March 6, 2015, the Court held a hearing to review the terms of the settlement and

ordered the parties to file additional submissions to assist the Court in determining whether to

approve the settlement. After receiving those submissions, the Court granted plaintiffs' Motion

for Preliminary Approval, directed the parties to provide notice to shareholders and other

interested parties, and stayed all further proceedings. [!d.~ 44]. On July 13, 2015, the Court

issued an Order approving the settlement in accordance with Federal Rule of Civil Procedure

23.1 and taking plaintiffs' Fee Application under advisement. [Doc. No. 115]. Thereafter, the

Court ordered ''that the parties schedule a settlement conference regarding the Fee Application

with the magistrate judge assigned to this action." [Doc. No. 116]. On August 26, 2015, the

parties appeared for a settlement conference and attempted to resolve this matter without success.

After reviewing the Fee Application and related briefing, the Court found plaintiffs'

submissions to be deficient. Specifically, the Court found the declarations provided by counsel

were "unsupported summaries of the fees incurred in litigating the derivative actions, organized

into charts that fail to provide a description of the work performed or the time allocated to

individual tasks." [Doc. No. 117 at 1]. As a result, the Court was unable to determine whether

2 [Doc. No. 82, Ex. A at~ 23] ("Federal Co-Lead Counsel and State Lead Counsel intend to apply to the Federal Court for an award of fees and expenses from the Company in connection with the Derivative Actions (the 'Fee Application'), which shall be the only fee application made by counsel for any plaintiff in the Derivative Actions.").

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the requested fees were reasonable and directed plaintiffs to submit "daily time records for each

timekeeper included in plaintiffs' lodestar calculation along with a summary of the work

performed, the amount of time associated with each category of activity, and a brief explanation

of why such time was reasonably necessary." [/d. at 2]. On February 4, 2016, plaintiffs filed

additional submissions in response to the Court's Order. [Doc. No. 118].

II. Standard of Review

The Fourth Circuit has endorsed a three-step procedure in determining the proper award

of attorneys' fees:

First, the court must .. determine the lodestar figure by multiplying the number of reasonable hours expended times a reasonable rate." Robinson v. Equ{fax Info. Servs., LLC, 560 F.3d 235, 243 (4th Cir. 2009). To ascertain what is reasonable in terms of hours expended and the rate charged, the court is bound to apply the factors set forth in Johnson v. Georgia Highway Express Inc., 488 F.2d 714, 717-19 (5th Cir. 1974). /d. at 243-44. Next, the court must "subtract fees for hours spent on unsuccessful claims unrelated to successful ones." /d. at 244. Finally, the court should award "some percentage of the remaining amount, depending on the degree of success enjoyed by the plaintiff." I d.

McAfee v. Boczar, 728 F.3d 81, 88 (4th Cir. 2013). The Johnson factors include: (I) the time

and labor expended; (2) the novelty and difficulty of the questions raised; (3) the skill required to

properly perform the legal services rendered; (4) the attorney's opportunity costs in pressing the

instant litigation; (5) the customary fee for like work; (6) the attorney's expectations at the outset

of the litigation; (7) the time limitations imposed by the client or circumstances; (8) the amount

in controversy and the results obtained; (9) the experience, reputation and ability of the attorney;

(10) the undesirability of the case within the legal community in which the suit arose; (II) the

nature and length ofthe professional relationship between attorney and client; and (12)

attorneys' fees awards in similar cases. See Barber v. Kimbrell's Inc., 577 F.2d 216,226 n.28

(4th Cir. 1978).

4


While these factors must guide the analysis, there is no strict formula the Court is

required to follow. See Trimper v. City of Norfolk, 846 F. Supp. 1295, 1303 (E.D. Va. 1994),

a.ff'd 58 F.3d 68 (4th Cir. 1995); In re Microstrategy, Inc., 172 F. Supp. 2d 778, 787 (E. D. Va.

2001) (recognizing that "arithmetic calculations aid the fee-setting process, but ultimately a trial

court's judgment is centrally important and may trump the calculations"). Moreover, as

repeatedly noted by the Fourth Circuit, "the most critical factor in determining the

reasonableness of a fee award is the degree of success obtained." Doe v. Chao, 435 F.3d 492,

506 (4th Cir. 2006). In that regard, the Court has reviewed fee award decisions in other

derivative actions, including those where the results obtained involved corporate governance

reforms.

In addition to the hours expended, the Court must assess the reasonableness of

counsel's hourly rates. In determining whether an individual's rate is reasonable, the

Court must consider '"prevailing market rates in the relevant community," which is

understood to be the community within the jurisdiction where the action is tried. Rum

Creek Coal Sales, Inc. v. Caperton, 31 F .3d 169, 175 (4th Cir. 1994 ). In that regard, the

Fourth Circuit has required that "[i]n addition to the attorney's own atlidavits, the fee

applicant must produce satisfactory specific evidence of the prevailing market rates in the

relevant community for the type of work for which he seeks an award." Plyler v. £vall,

902 F.2d 273, 277 (4th Cir. 1990) (internal citations and quotations omitted).

III. Analysis

Plaintiffs' Motion for Fees, Expenses, and Awards requests an award in the amount of

$1 ,0 I 8,957.39 (consisting of $975,000 in attorneys' fees and the reimbursement of litigation

expenses in the amount of$43,957.39), together with the approval of$2,500 to each ofthe four

5


plaintiffs. [Doc. No. I 08 at 1 ]. While the Company concedes that plaintiffs are entitled to an

award of fees and expenses, they object to the amount sought and contend that an award in the

total amount of no more than $200,000 is appropriate. See [Doc. No. 111 ). In that regard, the

Company argues that the result obtained by plaintiffs "is a modest settlement warranting a

modest award of fees and expenses from a company that is in dire financial straits." [Jd at 2).

As a point of comparison, they reference the Securities Class Action,3 which involved similar

allegations and "was ultimately resolved in exchange for a cash payment to the stockholder

class." [!d. at 1 ). Lastly, there is no objection to the $43,957.39 in litigation expenses4 or the

$10,000 in service awards. See [Doc. No. 113 at n.17).

Plaintiffs offer the following in support of their fee request:

• the Governance Reforms provide substantial benefits to Star Scientific and its shareholders;

• the Governance Reforms are designed to prevent a reoccurrence of misconduct that gave rise to the Derivative Actions;

3 The referenced Securities Class Action was filed on March 25, 2013 on behalf of all persons who purchased or otherwise acquired Star Scientific securities between October 31, 20 II and March 18, 2013. In re Star Scientific, Inc., Securities Litigation, No. 3:13cv0183 (E.D. Va.). Thereafter, plaintiffs filed a "Consolidated Amended Complaint for Violations of the Federal Securities Laws" on September 5, 2013, which included a revised "Class Period" of May 10, 2011 to September 12, 2014. ld. at ECF. No. 39. Following a series of mediation attempts, the parties reached a settlement, memorialized on February 5, 2015 with the submission of an Amended Stipulation of Settlement. /d. at ECF. No. 123. On March 2, 2015, the U.S. District Court for the Eastern District of Virginia (Richmond Division) "preliminarily approve[ d) the Amended Stipulation and the Settlement set forth therein, subject to further consideration at the Final Approval Hearing." ld at ECF No. 129. At the Final Approval Hearing on June 22,2015, the Court found the settlement to be fair, adequate, and in the best interest of the proposed class of shareholders in accordance with Federal Rule of Civil Procedure 23 and 28 U.S.C. § 1715. As a result, the Court approved "Settlement Consideration" in the amount of $5,900,000, attorneys' fees in the amount of $1,966,666.67, and reimbursement of costs incurred by plaintiffs' lead counsel in the amount of$55,107.66. ld at ECF. Nos. 142-44.

4 The requested litigation expenses include costs associated with "photocopying, filing fees, legal research, expert fees, mediator fees, postage, and travel expenses." [Doc. No. 108 at 21 ].

6


• the Governance Reforms will change the way the Company's Board oversees the day-to-day management of the Company;

• an award of $975,000 in attorneys' fees and reimbursement of expenses is reasonable when compared to fee awards in similar cases;

• the high quality of services rendered support this award of attorneys' fees; and,

• under a lodestar cross-check, the requested amount is reasonable as it reflects a negative lodestar and is only 61% of Plaintiffs' Counsel's collective lodestar.

[Doc. No. 108 at 2-3]. Plaintiffs also highlight that although the case was resolved without

the need for a trial, the settlement was the result of"hard-fought litigation, including motion

practice, extensive settlement negotiations, and confirmatory discovery," which "carefully

avoided duplication of tasks" relative to the parallel state court actions. [Id at 4].

a. Metltods of Calculation

When resolving fee disputes within the context of shareholder derivative litigation

courts utilize a variety of methods for calculating a reasonable fee award. Here, in support of

their Fee Application, plaintiffs reference the "substantial benefit" doctrine and argue that

"[ u ]nder the • substantial benefit' doctrine, counsel are entitled to an award of attorneys' fees

and costs where, as here, the settlement of a shareholder derivative action confers benefits-

monetary or otherwise- on the corporation." [!d. at 8] (citing 1\Ji/ls v. Electric Auro-Lite Co.,

396 u.s. 375 (1970)).

Within the Fourth Circuit, courts have referenced the approach taken in Mills within the

context of the "common-benefit doctrine," which requires a "nexus between litigation costs and a

definite, ascertainable class of beneficiaries." Brozonka/a v. 1\Jorrison, 272 F.3d 688, 690 (4th

Cir. 2001). Accordingly, while courts have referenced Mills as supporting an equitable award of

attorneys' fees, the Fourth Circuit appears to have limited this application to cases that involve

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the creation of a common fund and an ascertainable class of beneficiaries. See, e.g., Smillie v.

Park Chemical Co., 710 F.2d 271 (6th Cir. 1983).

In support of using the "substantial benefit" doctrine as the basis for the Court's fee

award, plaintiffs reference the settlement in the related Securities Class Action and argue that

because "courts routinely award securities class action plaintitfs' ... attorneys' fee awards in the

amount of 18-33.3% of the common fund," a similar award in these derivative actions is

appropriate because ''the benefits that plaintiffs have brought to the Company are at least equal

to the benefit that the Securities Class Action settlement will confer on the Company's

shareholders." [Doc. No. I 08 at 18]. But here, there was no financial recovery. Instead, the

settlement reached by the parties involved the implementation of various corporate governance

reforms and did not establish a common fund or otherwise involve any monetary recovery. For

that reason, and without reaching any conclusion as to the monetary value of these corporate

governance reforms referenced in the parties' settlement of the derivative actions, or the value of

those reforms relative to the financial settlement obtained in the Securities Class Action, the

Court finds the "substantial benefit" doctrine or the "common benefit" doctrine inapplicable to

this case. Rather, the Court must calculate plaintiffs' fee award under the Johnson rubric.

Plaintiffs' starting point for their Fee Application includes the following billable hours

and corresponding hourly rates, which effectively constitute what plaintiffs consider to be the

applicable lodestar: 5

5 The most recent lodestar submitted by plaintiffs' counsel is different than what appears in the Joint Declaration. Compare [Joint Decl. ~ 62] ("plaintiffs' counsel have expended 2,584.15 hours prosecuting and settling the Actions, and their resulting lodestar is $1,587,639.75"); with [Doc. No. 118, ~ 5] ("total lodestar incurred by plaintiffs' counsel was $1,586,919.75, as is evidenced by the prior submissions provided to the Court and the additional declarations now provided to the Court"). As calculated by the Court, there appears to be a difference of approximately $85,000 between the two submissions. This mathematical discrepancy appears to be the product of varying hourly totals between the billing summaries set forth in the declarations of counsel,

8


Firm Mcmberb Hourly Rate Hours Total Robert Harwood (P) $750 74.30 $55,725.00 Matthew Houston (P) $675 496.80 $335,340.00

Harwood Feffer, Daniella Quitt _{_P) $675 1.40 $945.00 Samuel Rosen {P) $675 73.00 $49,275.00

LLP Ben Sachs-Michaels (A) $350 156.80 $54,880.00 Glenn Mariano (PL) $275 92.80 $25,520.00 Craig Lowther (PL) $275 22.80 $6,270.00 Joshua Lifshitz (P) $695 414.00 $287,730.00

Lifshitz Law Firm Edward Miller (C) $650 1 I 8.50 $77,025.00 Michael Slade (A) $375 13.75 $5,156.25 Robert Cynkar (P) $775 2.00 $1,550.00

Cuneo Gilbert & Daniel Cohen (P) $695 67.00 $46,565.00 William Anderson (P) $575 15.50 $8,912.50

LaDuca, LLP Daniel Howick (PL) $175 16.50 $2,887.50 Marie Schenk (PL) $175 10.25 $1,793.75 Lewis Kahn (P) $770 137.60 $105,952.00 Albert Meyers (P) $700 133.70 $93,590.00

Kahn Swick & Melinda Nicholson (P) $650 514.60 $334,490.00 Michael Palestina (P) $625 21.50 $13,437.50

Foti, LLC Craig Geraci (A) $425 3.0 $1,275.00 Alexander Bums (A) $550 11.20 $6,160.00 Dawn Hartman (PL) $275 7.1 $1,952.50

The Krudys Law Mark Krudys (P) $405 26.25 $10,631.25 Finn, PLC Nancy Davidson (A) $183 37.10 $6,789.30

Holzer & Holzer, Corey Holzer (P) $640 112.25 $71,840.00 Michael Fistel, Jr. (P) $590 21 $12,390.00

LLC Marshall Dees (A) $445 117.75 $52,398.75

Sands Anderson PC Jeffrey Geiger (P) $300 5.00 $1,500.00

TOTAL 2,723.45 $1,671,981.30

Without any explanation concerning what hours were eliminated or reduced, or why, other than

"billing judgment," plaintiffs seek a fee award in the amount of$975,000, claiming that "the

the Star Scientific Derivative Litigation Time Reports, and individual time sheets. The Court has also identified supplemental filings that contain variations in the total number of billable hours. Compare [Joint Decl., Ex. K] with [Doc. No. 118, Ex. D]. For purposes of consistency, the Court has relied exclusively on the hours set forth in the Star Scientific Derivative Litigation Time Reports.

6 (P) =Partner; (A)= Associate; (C)= Of Counsel; (PL) =Paralegal.

9


requested fee constitutes but a modest fraction of [the] actual lodestar-approximately 61 o/o

making it presumptively reasonable." [Doc. No. I 08 at 19].

b. Ho11rly Rate

With respect to the rate charged for legal services, "the burden is on the fee applicant to

produce satisfactory evidence-in addition to the attorney's own affidavits-that the requested

rates are in line with those prevailing in the community for similar services by lawyers of

reasonably comparable skill, experience and reputation." Blum v. Srenson, 465 U.S. 886, 895

n.11 (1984); see also Plyler, 902 F.2d at 277. Determining whether an hourly rate is reasonable

"is fact-intensive and is best guided by what attorneys earn from paying clients for similar

services in similar circumstances." Rum Creek, 31 F.3d at 175.

The relevant market is "[t]he community in which the court sits," although some cases

have varied from this position when '"the complexity and specialized nature of a case may mean

that no attorney, with the required skills, is available locally,' and the party choosing the attorney

from elsewhere acted reasonably in making the choice." /d. at 179 (quoting Nat'/ Wildlife Fed'n

v. Hanson, 859 F.2d 313 (4th Cir. 1988)). The Fourth Circuit has also noted that "[t]he market

rate should be determined by evidence of what attorneys earn from paying clients for similar

services in similar circumstances, which, of course, may include evidence of what the plaintiffs

attorney actually charged his client." Depaoli v. Vacation Sales Assoc.\'., LLC, 489 F.3d 615, 622

(4th Cir. 2007).

The requirement that the reasonableness of hourly rates be supported by "specific

evidence" requires evidence beyond the submission of an attorney's own affidavits. See, e.g.,

Taylor v. Republic Services, Inc., No. I :12cv523, 2014 WL 325169, at *4 (E.D. Va. Jan. 29,

2014) ("To meet this burden, [plaintiff] must provide not only affidavits of her own attorneys,

10


but also 'specific evidence of the prevailing market rates in the relevant community for the type

of work for which [she] seeks an award.'"). The Fourth Circuit explained this requirement in

Robinson v. Equifax Information Services, LLC:

Although we recognize the district court authored a very thorough memorandum opinion, we nonetheless conclude that it abused its discretion by awarding the hourly rates requested by Robinson in the absence of "satisfactory specific evidence of the prevailing market rates .... " Examples of the type of specific evidence that we have held is sufficient to verify the prevailing market rates are affidavits of other local lawyers who are familiar both \\'ith the skills of the fee applicants and more generally with the type of work in the relevant community. In this case ... [Robinson] offered no specific evidence that the hourly rates sought for h[er] attorneys coincided with the then prevailing market rates of attorneys in the Eastern District of Virginia of similar skill and for similar work, which our case law required h[er] to do.

560 F.3d 235, 244, 245 (4th Cir. 2009) (alterations in original) (citations omitted); see also

Depaoli, 489 F.3d at 622-23 (reducing the hourly rates where the movant failed to present

satisfactory specific evidence). In addition to the affidavits of local counsel, the Fourth Circuit

has "recognized a range of sources from which to draw" in order to establish appropriate hourly

rates, including evidence of the fees that counsel has received in the past or affidavits of lawyers

who may not practice in the relevant area of law, but who are familiar with the skills of the fee

applicants and more generally with the type of work in the relevant community. Westmoreland

Coal Co. v. Cox, 602 F.3d 276,290 (4th Cir. 2010) (finding an Administrative Law Judge erred

in excusing the plaintiff "from his well-established burden to provide evidence of an applicable

prevailing rate as a starting point for the attorney's fees analysis").

Here, plaintiffs claim that their lodestar calculation is based on reasonable hourly rates

that reflect "the current market rate for lawyers litigating similar complex actions." [Doc. No.

108 at 20]. But rather than submitting the "specific evidence" that would establish the

11


reasonableness of those rates, plaintiffs rely on conclusory declarations concerning hourly rates7

and conclusory assessments concerning the inherent value of corporate governance reforms8 that

do not comply with the standards for establishing a reasonable fee award, as set forth in Grissom

v. The Mills Corp., 549 F.3d 313 (4th Cir. 2008), Barber v. Kimbrell's Inc., 577 F.2d 216 (4th

Cir. 1978), and Plyler v. Evatt, 902 F.2d 272, 277 (4th Cir. 1990). See, e.g., [Joint Decl., Exs. H,

I] ("The hourly rates are the usual and customary rates set by the firm for each individual and are

the same as the regular current rates which have been accepted in other securities and

shareholder litigation."); [Doc. No. 118, Exs. A, D] (representing the range ofhourly rates "is

well within rates approved by courts over eight years ago"). Other portions of plaintiffs' briefing

are more specific, but still inadequate under the standards imposed by the Fourth Circuit. See

[Doc. No. I 08 at n.l2] (referencing a nationwide billing survey conducted by the National Law

Journal in support of plaintiffs' position that the hourly rates of their counsel are "in line with

those prevailing in the community for similar services by lawyers of reasonably comparable

skills, expertise, and reputation").9 Moreover, these declarations are silent with respect to how

7 The evidence provided in support of these rates takes the form of declarations, originally filed as attachments to the Joint Declaration. See [Joint Decl., Exs. H-N]. Thereafter, in response to the Order dated January 6, 20 16, plaintiffs' counsel submitted revised declarations in further support of plaintiffs' Motion for Fees, Expenses, and Awards. See [Doc. No. 118, Exs. A-G].

8 See [Doc. No. 108 at 3] ("As discussed in detail below, courts have awarded fees in amounts between $710,000 and $3,500,000 in shareholder derivative actions like this one, where claims based on internal control deficiencies and self-dealing among directors and/or officers were settled for corporate therapeutics. By this measure alone, the requested $975,000 fee award is fair and reasonable.").

9 Given the Fourth Circuit's rejection of a similar regional survey to determine the prevailing hourly rate in Westmoreland Coal Co. v. Cox, 602 F.3d 276 (4th Cir. 2010), the Court cannot accept the survey from the National Law Journal as an adequate substitute for the "specific evidence" of applicable rates. Plaintiffs have also submitted what appear to be summaries of the law firms involved in this litigation, which the Court finds to be similarly deficient for establishing a reasonable hourly rate; however, the Court has considered the biographical

12


the rates charged compare to other firms who are involved in similar litigation before this Court.

In light of these deficiencies, the Court has considered appropriate reductions to counsel's hourly

rates in accordance with Depaoli v. Vacation Sales Assocs., LLC, 489 F.3d 615 (4th Cir. 2007).

Having reviewed these declarations and other applicable filings, and based on the Court's

familiarity with this litigation, the rates charged in this jurisdiction by partners, associates, and

paralegals of similar experience, the nature and complexity of the case, and the rates judicially

recognized as reasonable within this district, the Court will award fees based on the hourly rate

of $400 for partners, $200 for associates, and $100 for paralegals. 10 Applying these rates to the

billable hours included in plaintiffs' original lodestar of approximately $1.6 million yields a total

of $976,125. 11

information for specific attorneys to the extent that information is relevant to the attorney's experience, reputation, and ability.

10 See, e.g., In re Outside·wa/1 Tire Litig., 52 F. Supp. 3d 777, 788 (E.D. Va. 2014), rev 'd on other grounds, 636 F. App'x 166 (4th Cir .. 2016); Shammas v. Focarino, 990 F. Supp. 2d 587, 593 (E.D. Va. 2014); Jones v. Southpeak Interactive Corp., No. 3:12cv443, 2014 WL 2993443, at *7 (E.D. Va .. July 2, 2014); Auto. Fin. Corp. v. EEE Auto Sales, Inc., No. 1 :10cv1407, 201 I WL 3422648, at *8 (E .. D. Va. Aug. 3, 201 1); Lake Wright Hospitality, LLC v. Holiday Hospitality Franchising, Inc., No. 2:07cv530, 2009 WL 4841017, at *7 (E..D .. Va. Oct. 23, 2009); Alford v. Martin & Gass, Inc., No. 1 :08cv595, 2009 WL 2447936, at *4 (E.D. Va. Aug. 3, 2009).

11 The specific calculations resulting in this amount include the following:

Firm Member Hourly Rate Hours Total Robert Harwood (P) $400 74.30 $29,720 Matthew Houston (P) $400 496.80 $198,720 Daniella Quitt (P) $400 1.40 $560

Harwood Feffer LLP Samuel Rosen (P) $400 73.00 $29,200 Ben Sachs-Michaels (A) $200 156.80 $31,360 Glenn Mariano (PL) $100 92.80 $9,280 Craig Lowther (PL) $100 22.80 $2,280 Joshua Lifshitz (P) $400 414.00 $165,600

Lifshitz Law Firm Edward Miller (C) $400 118.50 $47,400 Michael Slade (A) $200 13.75 $2,750

Cuneo Gilbert & Robert Cynkar (P) $400 2.00 $800

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c. Billable Hours

The Court has also considered the reasonableness of the hours in plaintiffs' original

lodestar calculation by reviewing the individual timesheets provided by plaintiffs' counsel in

their supplemental filings. Based on that review, the Court is unable to assess with any accuracy

the number of hours reasonably and effectively devoted to legal work. In that regard, and based

on the descriptions that are provided, there appears to be widespread duplication of effort among

the seven law firms billing time to this case, a failure to properly account for travel time, as well

as the "lumping" of various tasks, including both legal and non-legal work. 12 The submitted

LaDuca, LLP Daniel Cohen (P) $400 67.00 $26,800 William Anderson (P) $400 15.50 $6,200 Daniel Howick (PL) $100 16.50 $1,650 Marie Schenk (PL) $100 10.25 $1,025 Lewis Kahn (P) $400 137.60 $55,040 Albert Meyers (P) $400 133.70 $53,480

Kahn Swick & Foti, Melinda Nicholson (P) $400 514.60 $205,840 Michael Palestina (P) $400 21.50 $8,600

LLC Craig Geraci (A) $200 3.0 $600 Alexander Bums (A) $200 11.20 $2,240 Dawn Hartman (PL) $100 7.1 $710

The Krudys Law Mark Krudys (P) $400 26.25 $10,500 Firm, PLC Nancy Davidson (A) $200 37.10 $7,420

Holzer & Holzer, Corey Holzer (P) $400 112.25 $44,900 Michael Fistel, Jr. (P) $400 21 $8,400 LLC Marshall Dees (A) $200 117.75 $23,550

Sands Anderson PC Jeffrey Geiger (P) $300 5.00 $1,500

12 See e.g., [Doc. No. 118, Ex. A at 24] (travel time is accompanied by descriptions oflegal work such as "Prepare for hearing."); [Doc. No. 118, Ex. D at 12] ("confer with [co-counsel], legal assistant, and local counsel regarding decision in securities action denying motion to dismiss and transcript from hearing; review order regarding same; review article regarding same; revise calendar regarding same; research regarding court reporter for transcript"). In another instance, a partner charging $675 per hour billed one hour for preparing a "pro hac vice motion draft," a completely unnecessary task within the Eastern District of Virginia, where a pro hac admission is obtained through the filing of a standard form application that requests only the identity of the lawyer, the case number, the party represented, a bar identification number, and basic contact information. See [Doc. No. 118, Ex. B]. Moreover, despite the Court's efforts to advise counsel of its concerns regarding the billing of travel time and other non-legal tasks, plaintiffs appear to

14


declarations also include generalized statements that "reductions were made to time in the

exercise of billing judgment" and that all remaining hours were "necessary for the effective and

efficient prosecution and resolution of the Federal Derivative Action [or Derivative Actions]."

[Joint Decl., Exs. H-N]. Overall, "[t]he absence of detailed documentation precludes a court, as

well as opposing counsel, from making a 'fair evaluation of the time expended ... [and] the

nature and need for the service." In re Outsidewa/1 Tire Litigation, No. 1 :09cv1217, 2016 WL

1441350, at *9-10 (E.D. Va. Apr. 7, 2016) ("Where, as here, time entries suffer from inadequate

documentation, such as lumping and vague task descriptions, a court must exercise sound

judgment based on knowledge of the case and litigation experience to reduce the number of

hours by an appropriate percentage."). 13

When faced with excessively vague or inadequate task descriptions in fee claims, courts

"have reduced fee claims by percentages ranging from 20% to 90%." Route Triple Seven Ltd.

P 'ship v. Total Hockey, Inc., 127 F. Supp. 3d 607, 621 (E. D. Va. 20 15); see also Rum Creek, 31

F.3d at 180 ("Generalized billing by multiple attorneys on a large case often produces

unacceptable duplication."). In sum, "where, as here, time records included lumping and vague

have ignored that advice. See [Doc. No. 117 at 1] (citing Two Men and a Truck/Int 'I Inc. v. A Mover Inc., No. 2:14cv248, 2015 WL 1548987, at *6 (E.D. Va. Apr. 7, 2015) (citations omitted) ("To allow travel time compensation at the same hourly rate as 'in-court or other active time would be unreasonable.' Indeed, the failure to reduce the hourly rate for travel time indicates a lack of billing judgment."). By way of example, the timesheet submitted on behalf of another partner charging $675 per hour includes 73 billable hours, 33.5 of which appear to relate, in whole or in part, to travel time. [Doc. No. 118, Ex. A].

13 As previously noted, the original affidavits submitted by plaintiffs' counsel provide no indication with respect to which hours correspond to certain tasks. The available information is best described as a variation of "block billing," which entails the grouping of several tasks under a common heading or entry without specifying the amount of time spent on each task. The declarations submitted in response to the Order on January 6, 2016 correct these deficiencies to a certain extent, although the Court is still unable to determine the precise amount of duplicative billing.

15


task description flaws and it is impractical to review over 4000 entries to attempt to ascertain

precisely how many hours to deduct to account for these flaws," a court "must make a judgment

based on knowledge of the case and litigation generally in reducing the relevant number of hours

forming the basis for a fee award." Outsidewa/1, 52 F. Supp. 3d at 790.

d. Reduction

In assessing an appropriate award, the Court has considered all the facts and information

submitted in light of the Johnson factors, including, among others, the extent to which the

requested fees were excessive or duplicative in light of the multiple law firms and lawyers that

worked on the same or similar tasks, the limited nature of the relief obtained, and the extent to

which certain litigation efforts were necessary to obtain that relief, and the extent to which the

corporate governance reforms in the settlement would have otherwise been obtained or adopted.

In that regard, the Court recognizes that certain Johnson factors, such as the experience of

counsel, the attorney's expectations at the outset of the litigation, and the contingent nature of

this case, weigh in plaintiffs' favor. However, after reviewing the submissions of counsel and

considering the litigation history, the nature of the time recorded, the issues involved, and the

result obtained, the Court concludes that an appropriate lodestar is calculated based on the

Court's adopted hourly rates and a 50% reduction of the hours claimed in plaintiffs' initial

lodestar. 14 Based on that reduction, the Court calculates a fee award in the amount of

$488,062.50.

IV. Conclusion

Based on an extensive and detailed review of the original and supplemental submissions

provided by counsel, and for the above reasons, it is hereby

14 This constitutes a reduction by an additional 11% to plaintiffs' own reduction of its initial lodestar by approximately 39%.

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ORDERED that plaintiffs' Motion for an Award of Attorneys' Fees. Reimbursement of

Expenses, and Incentive Awards [Doc. No. I 07] be, and the same hereby is, GRANTED in part

and DENIED in pm1: and it is further

ORDERED that plaintiffs shal l be awarded $488,062.50 in attorneys· fees and

$43.957.39 in litigation expenses, resulting in a total award of $532,0 19.89; and it is further

ORDERED that each plaintiff shall receive a $2.500 service award, which shall be paid.

pursuant to the Sti pulation and Agreement of Compromise. Settlement and Release [Doc. No. 82.

Ex. A I out of the $532,0 19.89 awarded herein, and not as a separate obligation of Star Scientific ,

Inc.

The Clerk is directed to enter judgment in favor of plaintiffs and against nominal

defendant Rock Creek Pharmaceuticals, Inc. (f/k/a Star Scientific, Inc.) in the total amount of

$532,0 19.89 pursuant to Federal Rule of Civil Procedure 58 and to fom·ard copies of this Order

to all counsel of record.

Alexandria, Virginia August 3, 20 16

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see - business law in virginia · [doc. no. 107]. upon consideration ... in re microstrategy, inc.,...

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