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Citigroup Frank letter in response

Citigroup Frank letter in response

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Published by Daniel Fisher
1/24/13 letter from Ted Frank to Judge Sidney H. Stein
1/24/13 letter from Ted Frank to Judge Sidney H. Stein

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Published by: Daniel Fisher on Jan 25, 2013
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Theodore H. FrankCenter for Class Action Fairness1718 M Street NW, No. 236Washington, DC 20036(703) 203-3848tfrank@gmail.com January 24, 2013The Honorable Sidney H. SteinU.S. District JudgeDaniel Patrick Moynihan U.S. Courthouse500 Pearl St.New York, NY 10007-1312Courtroom: 23AFax: (212) 805-7924
In re Citigroup Inc. Securities Litigation
 , No. 07 Civ. 9901(SHS)Request for Informal Discovery Conference Pursuant to L. R. 37.2Your Honor,I have filed a
 pro se
objection to the Rule 23(h) request in the above titled case(Dkt. No. 181) and a declaration and expert report in support of this objection (Dkt. No.182); I plan to supplement it with at least one additional expert report by the new March8 deadline. Plaintiffs have taken the objection seriously enough that they devotedtwenty-three pages of their brief (Dkt. No. 195) and over forty-five pages of a separatedeclaration (Dkt. No. 196) to respond to it. (Plaintiffs also provide a chart listing twenty-five objections I have previously been involved in. Dkt. No. 196-3. They fail to mentionthat I won outright victories, fee reductions, or settlement improvements in
ofthose twenty-five objections, with another four of the remaining eight still pendingresolution. It is unclear why they think this track record militates
my substantiveobjection.)As documented in my earlier declaration, I have made inquiries to class counselregarding whether they were willing to voluntarily provide me with discovery
Honorable Sidney H. Stein January 24, 2013page 2regarding their request for $100.3 million award. Specifically, I seek (1) to deposeplaintiffs’ two experts that submitted opinions regarding the reasonableness of classcounsel’s fee request, and (2) to discover information regarding the hourly ratesassigned to the contract attorneys in class counsel’s lodestar report. Class counsel hasrefused my requests and argued to both me and this Court that I am not entitled to
Reply Memorandum in Support of Request for Fees, Dkt. 195 at 24-25.While objector discovery is not absolute, the rule in the Second Circuit is that a“class action settlement offer by a lower court must be overturned … if it
 failed toallow objectors to develop on the record
facts going to the propriety of the settlement.”
Detroit v. Grinnell Corp
., 495 F.2d 448, 462 (2d Cir. 1974) (emphasis added and quotationsomitted). The limited discovery I seek is appropriate and necessary for several reasons.
 , the settlement’s structure prevents an adversarial process regarding classcounsel’s fee request. Plaintiffs rely upon
 Malchman v. Davis
 , 761 F.2d 893 (2d Cir. 1985),as justification for their stonewalling, but that case
the limited discovery that Iseek. The Second Circuit first noted that “On first impression, the district court's denialof discovery appears in conflict with” an earlier opinion requiring scrutiny of the issueon which objectors wanted discovery.
at 898. But
affirmed the denial ofdiscovery only because defendants had conducted discovery “at length” on the issueswhere the objectors wished discovery.
at 898-99. Here in contrast, there has been nodiscovery or testing of the claims made in the fee request. The settlement has a “clearsailing” provision permitting class counsel to make their $100.3 million request withoutchallenge from the defendants.
Settlement, Dkt. 155-1, ¶ 8. “Such a clause by its verynature deprives the court of the advantages of the adversary process.”
Weinberger v.Great N. Nekoosa Corp
., 925 F.2d 518, 525 (1st Cir. 1991). Class counsel’s submissions inconnection with their fee request are untested, and will remain untested without therequested discovery. Denying discovery here would unfairly prejudice class members’interests in responding to class counsel’s fee request.
 , the requested discovery seeks necessary information that has not beendisclosed or otherwise subject to discovery. My objection contains numerouscomplaints regarding the soundness of the methodologies plaintiffs’ experts employedand the sufficiency of the factual predicates on which they rely.
Objection, Dkt. 181at 6, 8, 14-19. Plaintiffs’ experts have not been deposed and examination is necessary totest such opinions. “Vigorous cross-examination” is an essential minimum of testing“shaky but admissible evidence.”
Daubert v. Merrell Dow Pharmaceuticals, Inc.
 , 509 US579 (1993) (
citing Rock v. Arkansas
 , 483 U.S. 44, 61 (1987));
accord Gayton v. McCoy
 , 593F.3d 610, 616, 619 (7th Cir. 2010). If an objector doesn’t cross-examine these experts, no
Honorable Sidney H. Stein January 24, 2013page 3one will; it would be most efficient for the cross-examination to occur in deposition and be summarized in briefing, rather than take place for hours at a fairness hearing. Unlessthe Court is to exclude the expert witnesses entirely, depositions are required.Information regarding the contract attorneys on class counsel’s lodestar report isalso necessary. A comparison between the lodestar report and the attorney resumessubmitted by class counsel reveals that $28.1 million of the $51.4 million lodestaramount was based on work performed by over 40 contract attorneys.
Exhibit E toMemo in Support of Fees, Dkt. 171-5. As set forth in my objection, these contractattorneys were likely being paid between $20 to $45/hour
they were performinglow-skilled work.
Objection, Dkt. 181 at 11-12. (And it turns out my objection wasinsufficiently cynical: reporting from an independent journalist on this case reveals thatthe attorneys were paid $32/hour at most, and otherwise contradicts the assertions inplaintiffs’ briefing and declarations.
Daniel Fisher, “Class-Action Firms CapitalizeOn Wretched Market For Law-School Grads,” Forbes.com (Jan. 4, 2013).) Yet leadcounsel assigned greatly exaggerated hourly rates for those contract attorneys between$325 to $550/hour.
See id
.This is wrong. “The lodestar figure should be based on
market rates
in line withthose [rates] prevailing in the community for
similar services
by lawyers of reasonablycomparable skill, experience, and reputation.’”
Reiter v. MTA N.Y. City Transit Auth
., 457F.3d 224, 232 (2d Cir. 2006) (emphasis added). Simply put, “Michelangelo should notcharge Sistine Chapel rates for painting a farmer’s barn.”
Ursic v. Bethlehem Mines
 , 719F.2d 670, 677 (3d Cir. 1983).
 Accord, e.g., Detroit v. Grinnell Corp.,
560 F.2d 1093, 1100 (2dCir. 1977);
Tucker v. City of New York
 , 704 F. Supp. 2d 347, 356 n.7 (S.D.N.Y. 2010);
In reKeySpan Corp. Sec. Litig.
 , CV 2001-5852 (ARR) (MDG), 2005 U.S. Dist. LEXIS 29068, at*53-*54 (E.D.N.Y. Aug. 25, 2005) (rejecting use of $275/hour attorneys to do documentreview).
And there is no question that attorneys who have to resort to $32/hour jobs inthe unpleasant conditions of temporary contract work are not even “Michelangelo.”Discovery is necessary to test plaintiffs’ assertions about the tasks of the contractattorneys. For example, plaintiffs claim that they needed highly-skilled attorneys to dothe work that was assigned to them. There is readily available evidence that couldprove this that plaintiffs did not submit to the Court. For example, did Hudson Legal(and other third-party providers) advertise for specific skills and experience? (Theindiscriminate $32/hour rate reported by Fisher—paid both to experienced attorneysand to recent law-school grads (and a 1998 graduate who was not admitted to the baruntil 2009,
Dkt. 196 ¶ 158)—certainly suggests a cannon-fodder scenario.) Didplaintiffs put the contract-work out for bid, and, if so, how was the project described? It

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