Williams v. MGM-Pathe Communications Co.

Herbert Eisen, Trustee for the Margaret M. Eisen Family Trust, appeals the district court’s award of attorneys’ fees in connection with the settlement of a securities-fraud class action. The class brought the action against MGM Pathe Communications Co., Pathe Communications Corp., Credit Lyonnais Bank Nederland, and Giancarlo Parretti (the “defendants”). The parties settled the suit in favor of the class.

*1027 The class’ attorneys contend that the district court should have calculated their fee as one-third of the entire $4.5 million settlement fund, for a fee of about $1.5 million, rather than calculating it as one-third of the class members’ claims against that fund, for a fee of only $3,300. We conclude that the district court abused its discretion 1 by basing the fee on the class members’ claims against the fund rather than on a percentage of the entire fund or on the lodestar. We thus reverse and remand.

In Boeing Co. v. Van Gemert, 444 U.S. 472, 480-81 , 100 S.Ct. 745, 750-51 , 62 L.Ed.2d 676 (1980), the Court concluded that the attorneys for a successful class may recover a fee based on the entire common fund created for the class, even if some class members make no…