15-1310-cv
Berman DeValerio v. Olinski
UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT
SUMMARY ORDER
RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A
SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED
BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT=S LOCAL RULE 32.1.1.
WHEN CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY
MUST CITE EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE
NOTATION ASUMMARY ORDER@). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY
OF IT ON ANY PARTY NOT REPRESENTED BY COUNSEL.
At a stated term of the United States Court of Appeals for the Second Circuit, held
at the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New
York, on the 16th day of December, two thousand sixteen.
PRESENT: BARRINGTON D. PARKER,
REENA RAGGI,
PETER W. HALL,
Circuit Judges.
----------------------------------------------------------------------
BERMAN DEVALERIO, WOLF HALDENSTEIN
ADLER FREEMAN & HERZ LLP, SCHNADER
HARRISON SEGAL & LEWIS LLP, COHEN,
PLACITELLA & ROTH PC, KOHN, SWIFT & GRAF
PC,
Appellants,
POLICE AND FIRE RETIREMENT SYSTEM OF THE
CITY OF DETROIT, individually and on behalf of all
others similarly situated, WYOMING STATE
TREASURER, WYOMING RETIREMENT SYSTEM,
CITY OF PHILADELPHIA BOARD OF PENSIONS
AND RETIREMENT, GENERAL RETIREMENT
SYSTEM OF THE CITY OF DETROIT, IOWA PUBLIC
EMPLOYEES’ RETIREMENT SYSTEM, LOS
ANGELES COUNTY EMPLOYEES RETIREMENT
SYSTEM, PUBLIC EMPLOYEES’ RETIREMENT
SYSTEM OF MISSISSIPPI,
Plaintiffs,
v. No. 15-1310-cv
1
JOHN OLINSKI, BLAIR S. ABERNATHY, SAMIR
GROVER, SIMON HEYRICK, VICTOR H.
WOODWORTH, BANC OF AMERICA SECURITIES,
LLC, J.P. MORGAN SECURITIES INC., as successor-in-
interest to Bear Stearns & Co., Inc., CITIGROUP
GLOBAL MARKETS INC., COUNTRYWIDE
SECURITIES CORPORATION, CREDIT SUISSE
SECURITIES (USA) LLC, DEUTSCHE BANK
SECURITIES INCORPORATED, DEUTSCHE BANK
NATIONAL TRUST COMPANY, GOLDMAN, SACHS
& CO., GREENWICH CAPITAL MARKETS, INC.,
INDYMAC SECURITIES CORPORATION, LEHMAN
BROTHERS INC., MORGAN STANLEY & CO.
INCORPORATED, UBS SECURITIES LLC,
JPMORGAN CHASE & CO., RBS SECURITIES INC.,
MICHAEL W. PERRY, BANK OF AMERICA
CORPORATION, as successor-in-interest to Merrill
Lynch, Pierce, Fenner & Smith, Inc., COUNTRYWIDE
SECURITIES CORPORATION,
Defendants-Appellees,
INDYMAC MBS, INCORPORATED, RESIDENTIAL
ASSET SECURITIZATION TRUST 2006-A5CB,
INDYMAC INDX MORTGAGE LOAN TRUST 2006-
AR9, INDYMAC INDX MORTGAGE LOAN TRUST
2006-AR11, INDYMAC INDX MORTGAGE LOAN
TRUST 2006-AR6, RESIDENTIAL ASSET
SECURITIZATION TRUST 2006-A6, RESIDENTIAL
ASSET SECURITIZATION TRUST 2006-A7CB,
INDYMAC INDX MORTGAGE LOAN TRUST 2006-
AR13, INDYMAC INDB MORTGAGE LOAN TRUST
2006-1, INDYMAC HOME EQUITY MORTGAGE
LOAN ASSET-BACKED TRUST, SERIES 2006-H2,
INDYMAC INDX MORTGAGE LOAN TRUST 2006-
AR21, RESIDENTIAL ASSET SECURITIZATION
TRUST 2006-A8, INDYMAC INDX MORTGAGE
LOAN TRUST 2006-AR19, INDYMAC INDA
MORTGAGE LOAN TRUST 2006-AR1, INDYMAC
INDX MORTGAGE LOAN TRUST 2006-AR23,
RESIDENTIAL ASSET SECURITIZATION TRUST
2006-A10, INDYMAC INDX MORTGAGE LOAN
TRUST 2006-AR12, INDYMAC INDX MORTGAGE
2
LOAN TRUST 2006-AR25, INDYMAC INDX
MORTGAGE LOAN TRUST 2006-R1, RESIDENTIAL
ASSET SECURITIZATION TRUST 2006-A11,
INDYMAC INDA MORTGAGE LOAN TRUST 2006-
AR2, INDYMAC INDX MORTGAGE LOAN TRUST
2006-AR27, INDYMAC HOME EQUITY MORTGAGE
LOAN ASSET-BACKED TRUST, SERIES 2006-H3,
RESIDENTIAL ASSET SECURITIZATION TRUST
2006-A12, INDYMAC INDX MORTGAGE LOAN
TRUST 2006-AR29, INDYMAC INDX MORTGAGE
LOAN TRUST 2006-AR31, INDYMAC INDX
MORTGAGE LOAN TRUST 2006-FLX1,
RESIDENTIAL ASSET SECURITIZATION TRUST
2006-A13, RESIDENTIAL ASSET SECURITIZATION
TRUST 2006-R2, INDYMAC INDA MORTGAGE
LOAN TRUST 2006-AR3, INDYMAC INDX
MORTGAGE LOAN TRUST 2006-AR14 (AND 5
ADDITIONAL GRANTOR TRUSTS FOR THE CLASS
1-A1A, CLASS 1-A2A, CLASS 1-A3A, CLASS 1-A3B
AND CLASS 1-A4A CERTIFICATES, to be established
by the depositor), RESIDENTIAL ASSET
SECURITIZATION TRUST 2006-A14CB, INDYMAC
INDX MORTGAGE LOAN TRUST 2006-AR33,
RESIDENTIAL ASSET SECURITIZATION TRUST
2006-A15, INDYMAC INDX MORTGAGE LOAN
TRUST 2006-AR35, INDYMAC INDX MORTGAGE
LOAN TRUST 2006-AR37, RESIDENTIAL ASSET
SECURITIZATION TRUST 2006-A16, INDYMAC
INDX MORTGAGE LOAN TRUST 2006-AR41,
INDYMAC INDX MORTGAGE LOAN TRUST 2006-
AR39, RESIDENTIAL ASSET SECURITIZATION
TRUST, INDYMAC INDX MORTGAGE LOAN
TRUST, INDYMAC INDA MORTGAGE LOAN
TRUST 2007-AR1, RESIDENTIAL ASSET
SECURITIZATION TRUST 2007-A1, INDYMAC INDX
MORTGAGE LOAN TRUST 2007-FLX1,
RESIDENTIAL ASSET SECURITIZATION TRUST
2007-A2, INDYMAC INDX MORTGAGE LOAN
TRUST 2007-AR1, INDYMAC INDX MORTGAGE
LOAN TRUST 2007-FLX2, RESIDENTIAL ASSET
SECURITIZATION TRUST 2007-A3, INDYMAC INDA
MORTGAGE LOAN TRUST, INDYMAC INDX
MORTGAGE LOAN TRUST 2007-AR5,
3
RESIDENTIAL ASSET SECURITIZATION TRUST
2007-A5, INDYMAC INDX MORTGAGE LOAN
TRUST 2007-AR7, INDYMAC INDX MORTGAGE
LOAN TRUST 2007-AR9, INDYMAC INDA
MORTGAGE LOAN TRUST 2007-AR2, INDYMAC
INDX MORTGAGE LOAN TRUST 2007-FLX3,
INDYMAC INDX MORTGAGE LOAN TRUST 2007-
AR11, RESIDENTIAL ASSET SECURITIZATION
TRUST 2007-A6, INDYMAC IMSC MORTGAGE
LOAN TRUST 2007-F1, RESIDENTIAL ASSET
SECURITIZATION TRUST 2007-A7, INDYMAC INDX
MORTGAGE LOAN TRUST 2007-AR13, INDYMAC
INDA MORTGAGE LOAN TRUST 2007-AR3,
INDYMAC INDX MORTGAGE LOAN TRUST 2007-
FLX4, INDYMAC IMJA MORTGAGE LOAN TRUST
2007-A1, INDYMAC IMJA MORTGAGE LOAN
TRUST 2007-A2, RAPHAEL BOSTIC, MOODY'S
INVESTORS SERVICE, INC., THE MCGRAW-HILL
COMPANIES, FITCH RATINGS, FITCH
INCORPORATION,
Defendants,
LYNETTE ANTOSH, INDYMAC INDX MORTGAGE
LOAN TRUST SERIES 2006-AR14, INDYMAC INDX
MORTGAGE LOAN TRUST SERIES 2006-AR2,
INDYMAC INDX MORTGAGE LOAN TRUST SERIES
2006-AR15, INDYMAC INDX MORTGAGE LOAN
TRUST SERIES 2006-AR4, INDYMAC INDX
MORTGAGE LOAN TRUST SERIES 2006-AR7,
INDYMAC RESIDENTIAL MORTGAGE BACKED
TRUST SERIES 2006-L2, INDYMAC RESIDENTIAL
ASSET-BACKED TRUST SERIES 2006-D, FITCH
RATING LIMITED,
Consolidated Defendants,
WILLIAM B. RUBENSTEIN,
Amicus Curiae.
----------------------------------------------------------------------
APPEARING FOR APPELLANT: SAMUEL ISSACHAROFF, New York,
New York; (Joseph J. Tabacco, Jr., on the
brief), Berman DeValerio, San Francisco,
California.
4
APPEARING AS APPOINTED WILLIAM B. RUBENSTEIN, Cambridge,
AMICUS CURIAE IN SUPPORT OF Massachusetts.
AFFIRMANCE:
Appeal from a judgment of the United States District Court for the Southern
District of New York (Lewis A. Kaplan, Judge).
UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED,
AND DECREED that the order entered on March 24, 2015, is AFFIRMED.
Appellants, law firms representing the plaintiff class, appeal from an award of
attorneys’ fees and reimbursed expenses following a class action settlement.
Specifically, they challenge the decision to award them 8.2% instead of 12.974% of the
$346 million global settlement, the higher percentage falling within a fee cap that was
agreed to ex ante by lead plaintiffs. They argue that “the fee negotiated ex ante between
the [Private Securities Litigation Reform Act of 1995 (‘PSLRA’), 15 U.S.C. §§ 77z-1 et
seq.] Lead Plaintiff and Lead Counsel is entitled to serious consideration and a
presumption of reasonableness.” Appellants’ Br. 30 n.17 (emphasis added). We assume
the parties’ familiarity with the facts and procedural history of this case, which we
reference only as necessary to explain our decision to affirm.
1. Standard of Review
“[W]hether calculated pursuant to the lodestar or the percentage method, the fees
awarded in common fund cases may not exceed what is ‘reasonable’ under the
circumstances.” Goldberger v. Integrated Res., Inc., 209 F.3d 43, 47 (2d Cir. 2000). We
review the reasonableness of a fee award only for abuse of discretion, see id., which we
will identify only if the award rests on an error of law or clearly erroneous fact finding, or
5
“cannot be located within the range of permissible decisions,” McDaniel v. County of
Schenectady, 595 F.3d 411, 416 (2d Cir. 2010) (internal quotation marks omitted). The
abuse of discretion standard is particularly deferential in the context of fee awards
because the “district court, which is intimately familiar with the nuances of the case, is in
a far better position to make [such] decisions than is an appellate court, which must work
from a cold record.” Goldberger v. Integrated Res., Inc., 209 F.3d at 48 (alteration in
original) (internal quotation marks omitted).
2. Failure to Apply a Presumption of Reasonableness to Negotiated Fees
Appellants maintain that the district court committed an error of law, specifically,
by failing to accord a “presumption” of reasonableness to fees negotiated in a PSLRA
case by the lead plaintiff and designated class counsel. No such argument appears to
have been advanced in the district court.
Appellants’ fee application articulated the lodestar and percentage methods as the
governing standards and stated that “[t]he determination of a reasonable attorneys’ fee is
within the ‘sound discretion’ of the district court.” App’x 758 (quoting Central States Se.
& Sw. Areas Health & Welfare Fund v. Merck-Medco Managed Care, L.L.C., 504 F.3d
229, 248 (2d Cir. 2007)). In arguing that their requested fee was reasonable, appellants
cited the negotiated agreement but made no mention of a presumption of reasonableness
based upon the PSLRA. See, e.g., id. at 759. In the section of their fee application
entitled “The Requested Fee Was Negotiated with Lead Plaintiffs and Their Judgment Is
Entitled to Great Weight,” id. at 773, appellants argued that lead plaintiffs had “evaluated
the Fee and Expense Application and believe[d] that it [was] fair and reasonable and
6
warrant[ed] approval by the Court,” id., without asserting that fee awards negotiated ex
ante by PSLRA lead plaintiffs are entitled to a presumption of reasonableness.
It is axiomatic that “appellate courts ordinarily abstain from entertaining issues
that have not been raised and preserved in the court of first instance.” Wood v. Milyard,
132 S. Ct. 1826, 1834 (2012). Following this principle, we declined to reach the same
presumption question here presented in In re Nortel Networks Corp. Securities Litigation,
539 F.3d 129 (2d Cir. 2008). There too, the plaintiff “never argued to the district court
that the PSLRA altered the fee-award scheme in any way or created a presumption of
reasonableness for fees agreed upon by the lead plaintiff.” Id. at 132. Moreover, like
appellants here, the Nortel plaintiff only cited In re Cendant Corp. Litigation (Cendant I),
264 F.3d 201 (3d Cir. 2001), “the Third Circuit authority upon which it [] primarily
relie[d],” for the first time on appeal. In re Nortel Networks Corp. Sec. Litig., 539 F.3d at
132.
Appellants attempt to distinguish this case from Nortel by arguing that they cited
to cases in the fee application, which in turn cited to Cendant I, thereby preserving the
issue “at the core of this appeal.” Appellants’ Reply Br. 8. The argument is
unpersuasive. The citations, read in context, would not be understood to urge a
presumption of reasonableness. Cf. United States ex rel. Keshner v. Nursing Pers. Home
Care, 794 F.3d 232, 235 (2d Cir. 2015) (rejecting contention that argument was
implicitly passed upon below because “[w]hen a district court declares a fee award
reasonable, it can hardly be presumed to have passed on any conceivable objection to the
fees, including those not raised by the parties”).
7
Rather, here, as in Nortel, the only argument presented was “that the district court
should give ‘great deference’ to [the PSLRA lead plaintiff’s] view that the negotiated fee
was fair and reasonable because [the PSLRA lead plaintiff] was an institutional investor
with a significant monetary interest in the settlement.” In re Nortel Networks Corp. Sec.
Litig., 539 F.3d at 133. If “[t]his argument was not sufficient to preserve the issue for
appeal” in Nortel, id., no more so can appellants’ argument below that the negotiated fees
were “entitled to great weight.” App’x 773.
Our conclusion is reinforced, not undermined as appellants argue, by the absence
of any reference to a presumption in the district court’s thorough and well-reasoned 22-
page memorandum opinion. See United States v. Griffiths, 47 F.3d 74, 77 (2d Cir. 1995)
(ruling that issue was not properly preserved for appeal, considering it significant that
neither magistrate judge nor district court referenced theory when ruling below).
To the extent “[w]e retain broad discretion to consider issues not timely raised
below[,]” Official Comm. of Unsecured Creditors of Color Tile, Inc. v. Coopers &
Lybrand, LLP, 322 F.3d 147, 159 (2d Cir. 2003) (internal quotation marks omitted), we
decline to exercise that discretion here. Although a declaration in support of the fee
application explained the existence of fee agreements and generally described their terms,
the agreements themselves were never entered into the record. See generally id. at 160
n.7 (describing “excerpts from deposition testimony describing the scope of the
engagement” as meager evidence). Thus, even if the presumption issue presented a pure
question of law, as a practical matter, the district court did not abuse its discretion in
failing to apply a presumption of reasonableness to contract terms that were never before
8
it. See id. at 160 (declining to reach unpreserved issue, even if pure question of contract
law, because resolution would “require ill-advised guesswork” based on “obstacle that
the contract has not been furnished to us”).
Nor will our refusal to address the presumption issue here work a manifest
injustice. Contrary to appellants’ contentions, Flanagan, Lieberman, Hoffman & Swaim
v. Ohio Public Employees Retirement System, 814 F.3d 652 (2d Cir. 2016), does not
control the question presented by this appeal, nor does it constitute intervening authority
that would excuse their failure to raise the argument below. See In re Vivendi, S.A. Sec.
Litig., 838 F.3d 223, 243–44 (2d Cir. 2016) (explaining that to excuse waiver on ground
of intervening authority, new authority cannot simply have sharpened or elaborated on
point; it must have established argument not earlier available to party seeking to excuse
waiver).
In any event, Flanagan drew on—but declined fully to embrace—In re Cendant
Corp. Securities Litigation (Cendant II), 404 F.3d 173 (3d Cir. 2005), in applying a
rebuttable “presumption of correctness” to a fee request that emanated “from non-lead
counsel for work completed after lead plaintiff’s [sic] appointment and lead plaintiffs
advocate[d] for non-lead counsel to receive a portion of a previously-capped percentage-
of-the-fund award.” Flanagan, Lieberman, Hoffman & Swaim v. Ohio Pub. Employees
Ret. Sys., 814 F.3d at 658. That is not this case, which implicates different concerns from
those typically arising when there is no dispute about the apportionment of fees between
class counsel after the aggregate fee has been extracted from the common fund.
9
In the fee-setting context here and in Cendant I, a court acts as the fiduciary of
absent class members whose recovery could be diminished by an excessive aggregate fee.
See Goldberger v. Integrated Res., Inc., 209 F.3d at 52 (instructing district courts to act
as “guardian of the rights of absent class members” in fee-setting context (internal
quotation marks omitted)). Such absent class members frequently hold small individual
stakes and lack sufficient knowledge and expertise to scrutinize or advocate against a
potentially excessive fee award. Flanagan acknowledged this concern in applying a
presumption of reasonableness in the narrow context of allocating a “capped percentage-
of-the-fund recovery,” a situation with no bearing on class members’ individual
recoveries. Flanagan, Lieberman, Hoffman & Swaim v. Ohio Pub. Employees Ret. Sys.,
814 F.3d at 658, 659 (emphasis added). Indeed, Flanagan explicitly declined to decide
whether such a presumption applied to a dispute about “fees that, if paid, would diminish
class members’ recovery,” id. at 658 (emphasis added), the situation here.
Significantly, in deciding not to hear an analogous unpreserved presumption
argument in Nortel, this court
examined the PSLRA and its legislative history[ and] found nothing
indicating a congressional intent for courts to consider the fees agreed upon
by PSLRA lead plaintiffs as presumptively reasonable. Indeed, the only
PSLRA provision related to attorneys’ fees places an obligation on district
courts to ensure independently that fees are reasonable: “Total attorneys’
fees and expenses awarded by the court to counsel for the plaintiff class
shall not exceed a reasonable percentage of the amount of any damages and
prejudgment interest actually paid to the class.” 15 U.S.C. § 78u–4(a)(6).
10
In re Nortel Networks Corp. Sec. Litig., 539 F.3d at 133 (footnote omitted). In these
circumstances, we conclude that declining to address appellants’ presumption argument
on appeal will not work a manifest injustice.
Accordingly, we conclude that the claim is not properly presented on appeal and
that there are no circumstances warranting the exercise of our discretion to consider it.
3. Conclusion
We have considered appellants’ remaining arguments and conclude that they are
without merit. Significantly, appellants do not challenge, and we therefore need not
review, the district court’s application of the percentage-of-the-fund or lodestar
methodologies dictated by controlling precedent in awarding fees. We therefore
AFFIRM the March 24, 2015 order of the district court.
FOR THE COURT:
CATHERINE O’HAGAN WOLFE, Clerk of Court
11