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Wednesday, August 18, 2010

9th Circuit Holds That Settlement Objection Deadline Cannot Predate Attorney Fee Motion

In In re Mercury Interactive Corp. Securities Litigation, ---F.3d --- (9th Cir., August 18, 2010), the Ninth Circuit held that the district court (N.D. Cal., Fogel) erred by setting the deadline for class members to object to a settlement on a date before lead counsel had filed their fee motion.
The district court certified a settlement class, preliminarily approved the settlement, and ordered notice to the class. The notice of the preliminary settlement informed the class of the general terms of the proposed settlement. It also informed class members that counsel would “request ... attorneys' fees in the amount of 25% (29.375 million).” Further, the class members were informed that they could object to the settlement or application for attorneys' fees by “appear[ing] ... at the Settlement Fairness Hearing” if they “submit [ted] a written notice of objection, received or postmarked on or before September 4, 2008.” No objections were made to the settlement itself, but two objections, including Teachers', were made to the proposed attorneys' fees.
Slip op. at 2. Lead counsel filed its attorney fee motion two weeks after the deadline to object to the settlement. A week later, the court approved the fee request.

The Court first noted that this is not an uncommon practice in securities cases:
We have not yet had occasion to construe Rule 23(h), and the schedule set by the district court in this case, requiring objections to be filed before the filing of the fee motion itself and its supporting papers, appears to be commonly employed by district courts throughout the Ninth Circuit and elsewhere in the country.
Slip op. at 4. Regardless, the Court held that the practice violates Rule 23 and may violate Due Process:
We hold that the district court abused its discretion when it erred as a matter of law by misapplying Rule 23(h) in setting the objection deadline for class members on a date before the deadline for lead counsel to file their fee motion. Moreover, the practice borders on a denial of due process because it deprives objecting class members of a full and fair opportunity to contest class counsel's fee motion.
Slip op. at 5.

The full text of the opinion is available here.

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