that they are entitled to attorneys' fees for their significant role in this action.
Although Pennwalt has not totally rebutted the presumption against them, they have shown that the benefit conferred was attributable to Centaur's likely success in acquiring Pennwalt. However, I find that the joint actions of Centaur in initiating a hostile takeover threat, along with plaintiffs' action, presenting a genuine legal challenge to the validity of Pennwalt's anti-takeover measures, rendered the hostile takeover a continuing possibility, which eventually induced defendants to seek a white knight. Although Centaur's actions may well have been the critical and more persuasive factor in Pennwalt's decision to merge with Elf, I find that petitioners' services protected the shareholders' interest in the fund created by Centaur from the risk posed by Centaur's potentially conflicting interests. See MacMillan at *10-12. That such conflicts did not actually arise is immaterial, because the plaintiffs' interest in any monetary fund ultimately created was at risk. Thus, because the benefit need not be directly and entirely attributable to plaintiffs' lawsuit, I find that there was a sufficient causal connection between the benefit and plaintiffs' lawsuit to warrant an award of attorneys' fees. I thus turn to what fee is considered merited.
III. Reasonableness of Fees and Costs
In determining what amount of attorneys' fees would be fair and reasonable, the court is faced with competing considerations. Allowances should be sufficiently liberal to compensate lawyers adequately so that use of the derivative action to police corporate management will be encouraged, but awards should not be so generous as to foster strike suits.
"The award of fees under the equitable fund doctrine is analogous to an action in quantum meruit: the individual seeking compensation has, by his actions, benefited another and seeks payment for the value of the service performed." Silberman v. Bogle, 683 F.2d 62, 64 (3d Cir. 1982) (quoting Lindy Bros. Builders v. American Radiator & Standard Sanitary Corp., 487 F.2d 161, 165 (3d Cir. 1973) ("Lindy I"). In cases where a common benefit exists, courts have awarded fees based on the lodestar method developed by the Third Circuit in Lindy I and Lindy II. Prandini v. National Tea Co., 557 F.2d 1015 (3d Cir. 1977); Lindy Bros. Builders, Inc. v. American Radiator & Standard Sanitary Corp., 540 F.2d 102 (3d. Cir. 1976) ("Lindy II"); Merola v. Atlantic Richfield Co., 515 F.2d 165 (3d Cir. 1975); Lindy I, supra. Yet where the benefit created was quantifiable, courts have awarded fees employing the percentage of recovery method. See Paul, Johnson, Alston & Hunt v. Graulty, 886 F.2d 268, 271 (9th Cir. 1989); In re Smithkline Beckman Corp. Securities Litigation, 751 F. Supp. 525 (E.D.Pa. 1990); Sala v. National Railroad Passenger Corp., 128 F.R.D. 210, 214 (E.D.Pa. 1989).
In this case, I find the benefit conferred by class plaintiffs to be unquantifiable, for two reasons. First, as explained, class plaintiffs can only be partly credited with conferring the benefit achieved. second, as in the MacMillan litigation, the class plaintiffs occupied only a monitoring role in the present litigation. Therefore, awarding a fee based on a percentage of the monetary fund would be inappropriate. However, because a fee should be awarded to reflect the fact that petitioners' efforts did benefit, albeit intangibly,
the shareholder class, I will evaluate the reasonableness of the fee requested under the lode star method.
A. Lodestar Method
The initial estimate of reasonable attorneys' fees requires the court to first inquire into the hours spent by the attorneys on their services and then multiply those hours by a reasonable hourly rate.
Lindy II, 540 F.2d at 113, 117-18; Lindy I, 487 F.2d at 167-68. The product of this multiplication is referred to as the "lodestar" amount and provides a reasonably objective basis for valuing an attorney's services. Once the lodestar has been established, the court may then adjust this figure with a "multiplier" to reflect the quality of the attorney's work, the benefit to the client, and the contingent nature of the litigation. In re Fine Paper Antitrust Litigation, 751 F.2d 562, 583-84 (3d Cir. 1984); Lindy II, 540 F.2d at 113, 117-18; Merola, 515 F.2d at 168; Lindy I, 487 F.2d at 167-68.
The party seeking attorney fees has the burden to prove that its request is reasonable. Rode v. Dellarciprete, 892 F.2d 1177 (3rd Cir. 1990). To meet its burden, the fee petitioner must "submit evidence supporting the hours worked and rates claimed." Hensley v. Eckerhart, 461 U.S. 424, 433 (1983). The application should provide the court with "fairly definite information as to the hours devoted to various general activities . . . and the hours spent by various classes of attorneys." Pawlak v. Greenawalt, 713 F.2d 972, 978 (3d Cir. 1983); Lindy I, 487 F.2d at 167. A fee petition meets the standard of specificity, set forth in Lindy I, if the district court can determine whether "the hours claimed are unreasonable for the work performed." Rode, 892 F.2d at 1190 (quoting Pawlak, 713 F.2d at 978).
Relying on this standard, I find petitioners' submissions to satisfy the specificity requirement. In support of their application, each of the nineteen petitioning plaintiffs' law firms submitted individual affidavits setting forth each attorney's hourly billing rate at the time of the litigation, the amount of time devoted by specific persons to particular activities, the lodestar value of this time, biographies of the firms and attorneys who worked on the litigation, and a breakdown of expenses incurred as of November 1989. In the course of drafting pleadings, conducting discovery, and negotiating settlement and the like, petitioning firms expended 2,053 hours of attorney and paralegal time
and arrived at a total of $ 436,128.75 for approximately fifteen months, from the inception of the case through November 1989.
Petitioners' concede, and I agree, that it would be inappropriate to increase the initial fee determination with a multiplier in this situation in light of the fact that they played a secondary role in this litigation and were not entirely responsible for the benefits produced. As it is within this court's discretion to grant attorney fees, I find that this amount constitutes a reasonable fee for the services rendered, and more than compensates for the inherent risks of representing class plaintiffs on a contingency basis.
Plaintiffs' counsel have also moved for reimbursement of $ 32,521.52 in expenses incurred from the inception of the lawsuit through November 30, 1989. These expenses include categories such as travel, long distance telephone, and computer services. After reviewing the law firms' supporting records and affidavits, the court finds that the amounts are adequately recorded and reasonable.
For the reasons stated, class plaintiffs are awarded attorneys fees totaling $ 436,128.75 and expenses totaling $ 32,521.52, to be taken from the fund established by Elf, the acquiring corporation of Pennwalt.
An order follows.
AND NOW, this 21st day of April 1993, upon consideration of petitioners' Application for an Award of Attorneys' Fees and Reimbursement of Expenses and an Order Dismissing the Action Without Prejudice as Moot, and defendant's response thereto, it is ORDERED that petitioners shall be awarded the sum of $ 468,650.27, representing a fee of $ 436,128.75 and reimbursement of expenses in the amount of $ 32,521.52. It is further ORDERED that the action is dismissed without prejudice.
BY THE COURT:
Robert S. Gawthrop, III J.