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In re Rite Aid Corp. Securities Litigation

396 F.3d 294 (2005)

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In re Rite Aid Corp. Securities Litigation

United States Court of Appeals for the Third Circuit
396 F.3d 294 (2005)

CC

Facts

Investors (plaintiffs) sued Rite Aid Corp. (Rite Aid), its former executives, and its outside auditor KPMG LLP (KPMG) (defendants) for violations of the Securities Exchange Act of 1934 and Rule 10b-5. The district court certified the class, appointed lead plaintiffs, and approved class counsel. Class counsel and Rite Aid then negotiated a settlement of $193 million, including an attorneys’ fees award of 25 percent of the settlement amount, which the district court approved. KPMG appealed the settlement, and the parties returned to negotiations, which ultimately resulted in a new settlement of $126.6 million with an attorneys’ fees request of 25 percent of the settlement amount. Notice of the settlement was sent to the class members, and two unnamed class members, including Walter Kaufmann (plaintiff), objected to the attorneys’ fees request. The district court conducted a fairness hearing and analyzed the attorneys’ fees request using the percentage-of-recovery method and then cross-checked the calculation using the lodestar method. The lodestar calculation was made considering the average hourly billing rate of only the senior-most partners of the class counsel firms. The district court approved the attorneys’ fees request over Kaufmann’s objections. Kaufmann appealed.

Rule of Law

Issue

Holding and Reasoning (Scirica, C.J.)

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