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Judge Will Allow Class To Object To $75M State Street Fees

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A Massachusetts federal judge credits CEI's Center for Class Action Fairness with helping him "evolve" his thinking on a complicated and controversial class action case.

A federal judge in Massachusetts said Friday that he would like to let class members in a $300 million settlement with State Street Corp. over its foreign exchange practices object to the allegedly overstated legal fees in the case, once the special master is finished with his probe.

Senior U.S. District Judge Mark Wolf said in Friday's order that his thinking had evolved about the complicated issues in the controversial case after hearing from Labaton Sucharow LLP and the Center for Class Action Fairness.

Judge Wolf proposes allowing class members to object to the $75 million in fees, which Labaton has acknowledged were overstated, after a special master is finished with his investigation, according to the order. He originally said he would give them 45 days from being notified of the issues, and now wants to notify the class members of ones that have come up since signing off on the settlement in November. At the time, there were no objections.

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Lawyers for the investors were paid out via the lodestar method. The lodestar method is calculated by taking the amount that would have been charged to paying clients and multiplying it — a difficult task when, in the case of Labaton and Thornton, they don’t have paying clients at all, but instead take home a slice of a successful settlement or go home empty-handed. 

In calculating the lodestar for this case, several lawyers were double-counted as having worked for Thornton and Labaton, amplifying the amount that they would have earned by some 9,000 hours.

In addition, some attorneys told the Boston Globe that they were paid as little as $25 per hour, even though their regular rate was cited in the lodestar method as more than $400.

The upcoming report and recommendation by the retired judge is just one problem for Thornton, which the Globe has also reported is being investigated for alleged political straw donations. The paper has also reported on a series of donations that Labaton and Thornton lawyers have made to the political leaders of pension funds that later hired the firms to file lawsuits.

The Center for Class Action Fairness and its attorney, Ted Frank, have asked to be allowed to follow along in the case as an amicus or a guardian for the interests of the class. As of Friday, Judge Wolf hadn’t yet ruled on that aspect.

Read the full article at Law360.