In an order filed yesterday, U.S. District Judge James Rosenbaum (D. Minn.) approved the $925 million UnitedHealth settlement related to options backdating. The court also awarded plaintiffs’ counsel $65 million for its work on the case, significantly less than the $110 million sought.
Lead counsel Coughlin Stoia had asked the Court to award attorneys’ fees of $110 million using a formula in its fee agreement with lead plaintiff CalPERS. The law firm supported its request with an opinion from a law professor that, as stated by Adam Smith, the self-regulated market knows best, and “prices are best set by buyers and sellers bargaining in a competitive environment.”
The court was unpersuaded, stating that
seldom have the groves of academe and the ivory towers sheltered within their leafy bowers seemed farther from reality. A lecture on the virtues of the unrestrained free market sounds a bit hollow in light of the parties’, this Nation’s, and indeed the world’s, experiences with the beauties of self-regulated financial markets during a period remarkably coterminous with the existence of this case. The Court rejects the proffered expert’s opinion.
The court found that a 7% fee, rather than the over-11% fee negotiated by the parties, was appropriate based on a lodestar determined using reasonable hourly rates for attorneys in the Minnesota area. The court added in a footnote that
If CalPERS wishes to divide its aliquot portion of the recovery between itself and its lawyers as provided in their fee agreement, this Opinion should not be read to suggest any opposition.