Full opinion text
CONCLUSIONS OF LAW, FINDINGS OF FACT, AND ORDER RE AWARD OF ATTORNEYS’ FEES FROM SETTLEMENT FUND MELINDA HARMON, District Judge. ROADMAP I. Conclusions of Law. 742 A. Jurisdiction . 742 B. Standard of Review for Fee Award. 743 C. PSLRA and Fee Award. 743 D. Federal Rule of Civ. P. 23. 744 E. Fee Methodology, the PSLRA, and the Fifth Circuit.. 745 1. Percentage Method. 746 2. Contingent Fee Agreements and the Fifth Circuit 748 3. PSLRA749 ) 4. Common Fund Cases. 750 5. Hybrid Approach and the Fifth Circuit. 751 6. Megafund Rule . 453 7. Reasonable Hourly Rate . 754 Johnson Factors and the Multiplier. 755 Enhancement: City of Burlington v. Dague and Fee-Shifting-Statute v. Commonr-Fund Cases. 757 10. Enhancement Requirements. 761 11 Burden of Proof. 762 12. Compensating for Delay in Payment. 763 13. Non-Class Counsel, The Common-Fund Doctrine, and the PSLRA 763 II. Findings of Fact.766 A. Fee Agreement and Percentage Method.766 1. 9.52% Fee Agreement.766 2. Size and Diversity of the Undertaking.771 3. Evaluation by Professor Coffee .773 4. Comparable Litigation Fee Awards.774 B. Alternatively, Lodestar Cross-Check.778 1. The Lodestar.778 2. Application of the Johnson Factors.786 a. time and labor required.786 b. novelty and difficulty of the issues.788 c. skill required to perform legal services properly.789 d. preclusion of other employment .789 e. customary fee..790 f. whether the fee is fixed or contingent.790 g. time limitations imposed by client or the circumstances.796 h. amount involved and the results obtained.796 i. experience, ability, and reputation of the attorney.797 j. undesirability of the case.797 k. nature and length of the professional relationship with the Regents.797 l. awards in similar cases.798 III. Remaining Objections from Class Members and Attorneys 803 A. Non-Objector Public Pension Funds. 803 B. Objections To Issues Not Previously Addressed. 804 1. General Objections by Multiple Parties. 804 2. Individual Objections. 804 a. Debra Lee Silverio. 804 b. Peter Carfagna on Behalf of the Rita Murphy Carfagna & Peter A. Carfagna Irrevocable Charitable Lead Annuity Trust U/A DTD 5/31/96. 805 c. Brian Dabrowski.. 811 d. Rinis Objectors. 817 e. The Enron Savings Plan and the Enron Stock Ownership Plan 820 f. George S. Bishop, Jill R. Bishop, Lon Wilkens, and Betty Wilkens. 821 g. Texas Attorney General.827 IV. Court’s Rulings .828 Pending before the Court in the above referenced cause is Lead Counsel Coughlin Stoia Rudman & Robbins LLP’s motion for an award of attorney’s fees (instrument # 5815) from the total recovery of approximately $7.2 billion, plus interest, achieved in settlements in this action. It is supplemented by a Statement, # 5864. Also pending, relating to the fee issue, are (1) a motion for additional information and for appointment of special master or enlargement of time for review (# 5963), filed by Peter Carfagna on behalf of Rita Murphy Carfagna & Peter A. Carfagna Irrevocable Charitable Lead Annuity Trust U/A DTD 5/31/96; (2) a motion for an order directing counsel to file and serve within two weeks a summary by law firm of what software was used by each firm to track and generate the time or billing records submitted, and CDs or DVDs of the data in electronic format with the metadata stripped (# 5967), filed by Rinis Travel Service Inc. Profit Sharing Trust U.A. 06/01/1989 and Michael J. Rinis, IRRA (“the Rinis Objectors”); and (3) Plaintiff Class Member/Objector Brian Dabrowski’s unopposed request to file supplemental objection (# 5890). Chitwood Harley Harnes LLP and Cunningham Darlow LLP have withdrawn (# 5990) their partial objection to Lead Counsel’s motion for an award of fees and their separate motion for attorneys’ fees and reimbursement of expenses (# 5858) after reaching an agreement with Lead Counsel regarding allocation of fees to them for legal services provided for the benefit of the class, to be paid out of whatever award granted pursuant to Lead Counsel’s fee petition, all with the approval of Lead Plaintiff. Specifically Lead Counsel seeks a fee of 9.52% of the total recovery, or approximately $688 million, plus interest accrued, in accordance with a fee agreement negotiated with Lead Plaintiff the Regents of the University of California at the outset of this litigation. Alternatively, if the Court chooses to apply the lodestar method and the twelve factors set out in Johnson v. Georgia Highway Express, Inc., 488 F.2d 714, 717-19 (5th Cir.1974), Lead Counsel insists their requested fee of approximately $688 million is also fair and reasonable if calculated under that method. Providing an analysis of the Johnson factors, Lead Counsel claims that as of September 30, 2007, Coughlin Stoia’s lodestar plus that of co-counsel was $127 million. Given the $688 million counsel would receive under the fee agreement, Lead Counsel requests the Court to apply a 5.4 multiplier to the $127 million lodestar to equal that amount. Alternatively, with counsel’s subsequent substantial work up to and including December 15, 2007, including the Plan of Allocation, Coughlin Stoia and co-counsel collectively have spent a total of 289,593.35 hours on this litigation at a blended hourly rate of $456, resulting in a lodestar of $131,971,583.20, and they request a multiplier of 5.2 if this time period is used. In addition to their own documentation, Lead Counsel’s fee request is supported by nationally prominent experts on fee awards in class actions: Professor Charles Silver from the University of Texas (# 5822, 5906); Professor John C. Coffee, Jr. from Columbia University Law School (# 5821); former Federal District Judge and Third Circuit Court of Appeals Judge H. Lee Sarokin (# 5819); Lucian Bebchuk, Professor of Law, Economics and Finance and Director of the Program on Corporate Governance at Harvard University (# 5820); and Kenneth M. Moscaret (# 5903, corrected 5911). Also in support of the requested fee award are Declarations from James H. Holst (# 5824) and Christopher M. Patti (# 5796) of the Regents, and Helen Hodges of Coughlin Stoia. (# 5818, 5909). After substantial briefing on Lead Counsel’s request for an award of fees, the Fairness Hearing held on February 29, 2008 regarding final approval of the settlement included extensive oral argument on the issue of the fee award. The Court has carefully reviewed those instruments in the record relating to the fee award issue. Accordingly, in approving Lead Counsel’s requested award, which the Court finds to be a fair and reasonable fee, the Court enters the following conclusions of law and findings of fact. I. Conclusions of Law: A. Jurisdiction The Court has federal question subject matter jurisdiction under 28 U.S.C. § 1331 over this dispute arising out of violations of the federal securities laws, in particular §§ 10(b), 20(a), and 20A of the Exchange Act of 1934, 15 U.S.C. §§ 78j(b), 78t(a), and 78t — 1, and Rule 10b-5 promulgated thereunder, 17 C.F.R. § 240.10b-5, and §§ 11, 12(a)(2), and 15 of the Securities Act of 1933, 15 U.S.C. §§ 77k, 771(a)(2), and 77o. This Court also has jurisdiction under the Private Securities Litigation Reform Act of 1995 (“PSLRA”) pursuant to § 22 of the Securities Act of 1933, 15 U.S.C. 77v, and § 27 of the Securities Exchange Act of 1934,15 U.S.C. § 78aa. As for personal jurisdiction over the absent plaintiff class members, in Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 105 S.Ct. 2965, 86 L.Ed.2d 628 (1985), the Supreme Court noted the distinction between an out-of-state defendant haled into a foreign court to defend or suffer a default judgement and an absent class-action plaintiff who may lack all minimum contacts with the forum state and cited its earlier opinion in Hansberry v. Lee, 311 U.S. 32, 40-41, 61 S.Ct. 115, 85 L.Ed. 22 (1940): [A] “class” or “representative” suit was an exception to the rule that one could not be bound by a judgment in person-am unless one was made fully a party in the traditional sense.... As the Court pointed out in Hansberry, the class action was an invention of equity to enable it to proceed to a decree in suits where the number of those interested in the litigation was too great to permit join-der. The absent parties would be bound by the decree so long as the named parties adequately represented the absent class and the prosecution of the litigation was within the common interest. Shutts, 472 U.S. at 808, 105 S.Ct. 2965. Thus “a forum State may exercise jurisdiction over the claim of an absent class-action plaintiff, even though the plaintiff may not possess the minimum contacts with the forum which would support personal jurisdiction over a defendant.” Id. at 811, 105 S.Ct. 2965. Nevertheless, [i]f the forum State wishes to bind an absent plaintiff concerning a claim for money damages or similar relief at law, it must provide minimal procedural due process protection. The plaintiff must receive notice plus an opportunity to be heard and participate in the litigation, whether in person or through counsel. The notice must be the best practicable, “reasonably calculated under all circumstances”, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections.... The notice should describe the action and the plaintiffs’ rights in it. Additionally, we hold that due process requires at a minimum that an absent plaintiff be provided with an opportunity to remove himself from the class by executing and returning an “opt out” or “request for exclusion” form to the court. Finally, the Due Process Clause of course requires that the named plaintiff at all times adequately represent the interests of the absent class members. Id. at 811-12, 105 S.Ct. 2965 [citations omitted]; see also Silber v. Mahon, 18 F.3d 1449, 1453-54 & n. 3 (9th Cir.1994) (applying Shutts in securities class action). Such reasonable notice and opportunity to opt out has been provided to out-of-state Class Members in this action. B. Standard of Review for Fee Award “The standards employed calculating attorneys’ fees awards are legal questions subject to plenary review, but ‘[t]he amount of a fee award ... is within the district court’s discretion so long as it employs correct standards and procedures and makes findings of fact not clearly erroneous.’ ” In re Rite Aid Corp. Sec. Litig., 396 F.3d 294, 299 (3d Cir.2005), quoting Pub. Interest Research Group of N.J., Inc. v. Windall, 51 F.3d 1179, 1184 (3d Cir. 1995). Thus the amount of an attorney’s fee award by the district court is reviewed by the Fifth Circuit for abuse of discretion, while any fact finding underlying the award is reviewed for clear error. Strong v. BellSouth Telecomms., Inc., 137 F.3d 844, 850 (5th Cir.1998). C. PSLRA and Fee Award As a threshold matter, some parties have argued the Private Securities Litigation Reform Act of 1995 limits the award of attorney’s fees and costs and preempts the traditional approaches to calculating a fee award. The relevant statute provides, “Total attorneys’ fees and expenses awarded by the court to counsel for the plaintiff class shall not exceed a reasonable percentage of the amount of any damages and prejudgment interest actually paid to the class.” See 15 U.S.C. § 78u-4(a)(6). The statute does not define “reasonable percentage.” While the term expressly embraces the percentage method, the PSLRA does not prohibit the application of the lodestar method to fees as long as the result does not exceed a reasonable percentage of the class recovery. See, e.g., In re Cendant Corp. Litig., 264 F.3d 201, 284-85 (3d Cir.2001) (citing H.R. Conf. Rep. 104-369) (“By not fixing the percentage of fees and costs counsel may receive, the Conference Committee intends to give the court flexibility in determining what is reasonable on a case-by-case basis. The Conference Committee does not intend to prohibit use of the lodestar approach as a means of calculating attorney’s fees. The provision focuses on the final amount of fees awarded, not the means by which such fees are calculated.”), cert. denied sub nom. Mark v. Cal. Pub. Employees’ Retirement System, 535 U.S. 929, 122 S.Ct. 1300, 152 L.Ed.2d 212 (2002); Rite Aid, 396 F.3d at 300 (“We do not believe the Private Securities Litigation Reform Act precludes the use of the lodestar method as a check on the percentage-of-recovery calculation.”); Manual for Complex Litig. Fourth (“MCL (Fourth)”), § 12.122 (Federal Judicial Center 2004) (“the lodestar is at least useful as a cross-check ... using affidavits and other information provided by the fee applicant”). See also S.Rep. No. 104-98 at *12 (1995), U.S.Code Cong. & Admin.News 1995, p. 679 (“By not fixing the percentage of attorney’s fees and costs that may be awarded, the Committee intends to give the court flexibility in determining what is reasonable on a case-by-case basis. The provision focuses on the final amount of damages awarded, not the means by which they are calculated.”) As long as the resulting fee award is reasonable, it is not in violation of the PSLRA. The Advisory Committee Notes to Fed. R.Civ.P. 23(h), allowing an award of reasonable fees, states that the PSLRA “explicitly makes this factor a cap for a fee award in actions to which it applies.” It should also be noted that the statute empowers the Lead Plaintiff to choose and retain Lead Counsel, 15 U.S.C. § 78u-4 (a) (3)(B)(v), including to select payment by the percentage method, as long as the result is reasonable. D. Federal Rule of Civil Procedure 23 and Court’s Role Fed.R.Civ.P. 23(e)(2) requires that the district court, when asked to approve a proposed settlement that would bind class members, to hold a hearing and determine whether the settlement “is fair, reasonable and adequate.” As part of its duty to independently review and approve class action settlement agreements under Fed. R.Civ.P. 23 for the protection of the absent class and the public, the district court “must assess the reasonableness of the attorneys’ fees” and ensure that they are “divided up fairly among plaintiffs’ counsel.” Strong v. BellSouth Telecommunications, Inc., 137 F.3d 844, 849 (5th Cir.1998); In re High Sulfur Content Gasoline Products Liability Litigation, 517 F.3d 220, 227-28 (5th Cir.2008). Federal Rule of Civil Procedure 23(e) states, “The claims, issues or defenses of a certified class may be settled, voluntarily dismissed, or compromised only with the court’s approval.” Federal Rule of Civil Procedure 23(h) addresses the issues of attorney’s fees and nontaxable costs and provides in relevant part: In a certified class action, the court may award reasonable attorney’s fees and nontaxable costs that are authorized by law or by the parties’ agreement. The following procedures apply: (1) A claim for an award must be made by motion under Rule 54(d) subject to the provisions of this subdivision (h), at a time the court sets. Notice of the motion must be served on all parties and, for motions by class counsel, directed to class members in a reasonable manner. (2) A class member; or a party from whom payment is sought, may object to the motion. (3) The court may hold a hearing and must find the facts and state its legal conclusions under Rule 52(a) .... Id. (emphasis added by the Court). The Advisory Committee Notes indicate that “an action certified as a class” includes cases where a class is certified for settlement purposes. In a common fund case, as noted by the Third Circuit Task Force, there is a greater need for the judge to act as a fiduciary for the beneficiaries (who are paying the fee), particularly in the class action situation, because few if any of the action’s beneficiaries actually are before the court at the time the fees are set. Judicial scrutiny is necessary inasmuch as the fee will be paid out of the fund established by the litigation, in which the defendant no longer has any interest, and the plaintiffs attorney’s financial interests conflict with those of the fund beneficiaries. As a result there is no adversary process that can be relied upon in the setting of a reasonable fee. Report of the Third Circuit Task Force: Court Awarded Attorney Fees, 108 F.R.D. 237, 251 (1986). Furthermore, “the plaintiffs’ attorney’s role changes from one of a fiduciary for the clients to that of a claimant against the fund created for the clients’ benefit.” Id. at 255. E. Fee Methodology, the PSLRA, and The Fifth Circuit The two traditional methods employed by courts for determining an attorneys’ fees award in common fund class action cases are (1) the percentage of the settlement fund (or contingent fee) method and/or (2) the lodestar method (multiplying the number of hours reasonably expended by a reasonable hourly rate and then, in its discretion, in the Fifth Circuit the Court can adjust the lodestar up or down by applying the twelve factors set out in Johnson v. Georgia Highway Express, Inc., 488 F.2d 714, 717-19 (5th Cir.1974)). Strong v. BellSouth Telecommunications, Inc., 137 F.3d 844, 850 (5th Cir., 1998); Von Clark v. Butler, 916 F.2d 255, 258 (5th Cir.1990). As will be discussed, there are hybrid versions of the two. 1. Percentage Method The United States Supreme Court has held that the application of the percentage method is proper for determination of a reasonable fee award in common fund cases. Blum v. Stenson, 465 U.S. 886, 900 n. 16, 104 S.Ct. 1541, 79 L.Ed.2d 891 (1984). The Third Circuit Task Force concluded that the percentage method has certain significant advantages over the lodestar approach in contingent common-fund cases. Recommending the use of the percentage method when a common settlement fund is created, the influential Third Circuit Task Force’s Report determined that a lodestar approach (1) “increases the workload of an already overtaxed judicial system”; (2) is “insufficiently objective and producefs] results that are far from homogenous” ; (3) “creates a sense of mathematical precision that is unwar ranted in terms of the realities of the practice of law”; (4) “is subject to manipulation by judges who prefer to calibrate fees in terms of percentages of the settlement fund or the amounts recovered by the plaintiffs or of an overall dollar amount”; (5) “encourages lawyers to expend excessive hours, ... engage in dupli-cative and unjustified work, inflate their ‘normal’ billing rate, and include fictitious hours or hours already billed on other matters, perhaps in the hope of offsetting any hours the court may not allow”; (6) “creates a disincentive for early settlement of cases”; (7) “does not provide the district court with enough flexibility to reward or deter lawyers to that desirable objectives, such as early settlement will be fostered”; and (8) “works to the particular disadvantage of the public interest bar” by undermining the efficacy of many of the fee statutes that Congress has enacted because the lodestars in the “money” cases, such as securities, “are set higher than in cases under statutes promoting nonmone-tary social objectives such as the Civil Rights Attorneys Fees Awards Act of 1976.” 108 F.R.D. at 247-49 (emphasis in original). The Third Circuit Task Force Report on Selection of Class Counsel, 208 F.R.D. 340, 421 (Jan. 15, 2002), asserts that “use of the lodestar may result in undercompensation of talented attorneys. Experienced practitioners know that a highly qualified and dedicated attorney may do more for a class in an hour than another attorney could do in ten. The lodestar can end up prejudicing lawyers who are more effective with a lesser expenditure of time.” One treatise writer has observed, “A lodestar figure cannot fully compensate counsel” in a contingency common fund case “because the resulting amount does not reflect the risk of nonpayment and thus is not equal to the fair market value of the counsel’s services.” 1 Alba Conte, Attorney Fee Awards § 2.10 (database updated May 2007). Furthermore, risk must be assessed ex ante, from the outset of the case, not in hindsight. In re Cardinal Health Inc. Sec. Litig., 528 F.Supp.2d 752, 758 (S.D.Ohio 2007), citing In re Cendant Corp. Litig., 264 F.3d 201, 282 (3d Cir.2001). Here the requested percentage (blended 9.52%) of the settlement fund was that set out in a fee agreement between Lead Plaintiff and Lead Counsel at the beginning of the litigation. The Restatement (Third) of the Law Governing Lawyers § 34 (2007) proposes that the court should examine three issues in evaluating the reasonableness of a fee agreement. “First, when the contract was made, did the lawyer afford the client a free and informed choice?” Some of the circumstances the court should consider include the sophistication of the client in entering into the agreement, whether the client had a reasonable opportunity to pursue other legal representation, and whether the lawyer sufficiently informed the client of the probable cost, the benefits and the drawbacks of the agreement. Id. “Fees agreed to by clients sophisticated in entering such arrangements (such as a fee contract made by inside legal counsel in behalf of a corporation) should almost invariably be found reasonable.” Id. The second issue is “does the contract provide for a fee within the range commonly charged by other lawyers in similar representations?” The court should compare the percentage in the contingent-fee contract before it with “percentages commonly used in similar representations for similar services.” Id. Third, did a subsequent change in circumstances make the fee contract unreasonable? Id. The Restatement observes, “Although reasonableness is usually assessed as of the time the contract was entered into, later events might be relevant.” Id. “A contingent fee contract ... allocates to the lawyer the risk that the case will require much time and produce no recovery, and to the client the risk that the case will require little time and produce a substantial fee. Events within the range of risks, such as a high recovery, do not make unreasonable a contract that was reasonable when made.” Id. Most federal courts use the percentage of the fund approach in awarding attorneys’ fees in common fund classes. “ ‘Despite the apparent advantages of the percentage fee method over the lodestar method in common fund cases the law in the Fifth Circuit concerning which method should be applied is at best unclear.’ ” 4 Alba Conte and Herbert B. Newberg, Newberg on Class Actions § 14:10 Hybrid Class Actions (4th ed. Database updated June 2007), quoting In re Harrah’s Entertainment, Inc., No. Civ. A. 95-3925, 1998 WL 832574, *3 (EJD.La.1998) (citing In re Combustion, Inc., 968 F.Supp. 1116, 1134 (W.D.La.1997)). Although the clear trend of the majority of courts in common fund cases is to use the percentage method, the Fifth Circuit has not expressly adopted such an approach. 4 Newberg on Class Actions § 14:10. Nor, for that matter, has it ever reversed a district court’s application of the percentage method. Shaw v. Toshiba America Information Systems, 91 F.Supp.2d 942, 967, n. 15 (E.D.Tex.2000) (“Quite the contrary, in Longden v. Sunderman, 979 F.2d 1095[, 1100 n. 11] (5th Cir.1992), the Fifth Circuit affirmed a percentage fee award in a securities class action, noting that the district court had stated its preference for the percentage-of-recovery method ‘as a matter of policy.’ ”). 2. Fee Agreements and the Fifth Circuit Originally in Johnson v. Georgia Highway the Fifth Circuit applied the twelve factors in a statutory “fee-shifting” context. Subsequently, however, in Hoffert v. General Motors Corp., 656 F.2d 161, 165 (5th Cir.1981), even though the parties had previously entered into a contingent fee agreement, the appellate panel applied the Johnson analysis to insure that the fee was “reasonable under all circumstances of the case, including the risk and uncertainty of compensation.” Thus in Hoffert where a fee agreement existed, the Fifth Circuit “blended” the percentage fee award with the Johnson factors. Strong, 137 F.3d at 849 (“[A] district court is not bound by the agreement of the parties to the amount of attorneys’ fees.... The court must scrutinize the agreed-to fees under the standards set forth in Johnson ... and not merely ratify a prearranged compact, [citations omitted]”), citing inter alia Piambino v. Bailey, 610 F.2d 1306, 1328 (5th Cir.) (“A district court is not bound by the agreement of the parties as to the amount of attorneys’ fees.... In fixing the amount of attorneys’ fees the court must, of course, take all of the Johnson criteria into account, including the difficulty of the case and the uncertainty of recovery. He is not, however, merely to ratify a pre-arranged compact.”) (holding that by summarily approving attorney’s fees in an unopposed settlement agreement the district court “abdicated its responsibility to assess the reasonableness of the attorneys’ fees proposed under the settlement of a class action, and its approval of the settlement must be reversed on this ground alone.”), cert. denied, 449 U.S. 1011, 101 S.Ct. 568, 66 L.Ed.2d 469 (1980). See also Longden v. Sunderman, 979 F.2d 1095, 1110 & n. 11 (5th Cir.1992) (affirming district court’s use of percentage method in evaluating fee petition where it was clear that the district court “had reviewed all of the relevant time and expense records before arriving at its conclusions, and that it had discussed each Johnson factor when it had ruled on the fee issue.”). Nevertheless, the district court’s “Johnson analysis ‘need not be meticulously detailed to survive appellate review,’ ... [but] must be ‘complete enough to assume a review which can determine whether the court has used proper factual criteria in exercising its discretion to fix just compensation.’ [citations omitted]” High Sulfur, 517 F.3d at 228. 3. PSLRA At the same time, despite such con-clusory remarks about application of the Johnson factors for fee awards in non-securities cases, it should be emphasized that the Fifth Circuit has never ruled on a fee award in a post-PSLRA securities class action case nor addressed the fact that the statute clearly permits Lead Plaintiff to choose how to retain Lead Counsel, including under a percentage-of-the-settlement-fund agreement, limited only by a requirement that the result be reasonable. 15 U.S.C. § 78u-4 (a) (3)(B)(v) (The properly selected lead plaintiff, presumably the plaintiff with the greatest losses and usually a sophisticated, institutional investor, “shall, subject to the approval of the court, select and retain counsel to represent the class.”); 15 U.S.C. § 78u-4(a)(6) (“Total attorney’s fees and expenses awarded by the court to counsel for the plaintiff class shall not exceed a reasonable percentage of any damages and prejudgment interest actually paid to the class.”); Declaration of Charles Silver, # 5906 at 6-9. This Court agrees with the Third Circuit Task Force Report on Selection of Class Counsel, 208 F.R.D. 340, 425-26 (Jan. 15, 2002), that deference to the empowered plaintiffs choice of counsel in PSLRA cases should extend to the ex post review of the fee agreement in those cases. The PSLRA establishes a model of client control that extends not only to appointment of counsel but also to monitoring of counsel and negotiation of the fee. The Task Force concludes, therefore, that strict scrutiny of the fee agreement is inconsistent with the client-driven litigation model established in the PSLRA.... The fee reached by agreement between the “most adequate” plaintiff and counsel should be accepted by the court unless 1) it is clearly excessive; 2) it has been rendered unfair by unforeseen developments; or 3) it is found in an ex post review that the fee was not reached by arm’s length negotiation between lead plaintiff and counsel. Indeed, numerous district courts in this Circuit have applied the percentage method alone in awarding attorneys’ fees in common fund cases under the PSLRA. See, e.g., Shaw v. Toshiba America Information Systems, 91 F.Supp.2d 942, 966-67 (E.D.Tex.2000) (listing twenty district court cases in the Fifth Circuit utilizing the percentage approach). Recently, in In re Dynegy, Inc. Securities Litig., H-02-1571, Order Awarding Attorney’s Fees and Reimbursement of Expenses, # 5817 (Compendium of Exhibits), Ex. C at 1, which was brought under the PSLRA, Judge Lake expressly “adopt[ed] the percentage-of-recovery method of awarding attorneys’ fees” under Boeing, 444 U.S. at 478, 100 S.Ct. 745, and Blum v. Stenson, 465 U.S. at 900 n. 16, 104 S.Ct. 1541, in a common fund securities action. Judge Lake stated that “the Supreme Court has indicated that computing fees as a percentage of the common fund recovered is the proper approach,” and awarded fees in the amount of 8.725% of the common fund in accord with the fee percentage negotiated by Lead Plaintiff with Lead Counsel (also Coughlin Stoia) prior to their appointment by the Court. See also Schwartz v. TXU Corp., 3:02CV2243-K, Order Awarding Attorneys’ Fees and Reimbursement of Expenses, si. op. at 2-3 (N.D.Tex. Nov. 8, 2005) (“awarding percentage fee negotiated between Lead Plaintiffs and Co-Lead Counsel,” 22.2% of $149,740,000 settlement fund, and recognizing a “presumption that a 22.2% fee is ... reasonable” and that a “fee structure ... which provides a higher percentage fee for increasing levels of recovery is entitled to deference because it was designed to incentivize counsel to achieve the maximum result possible for the class”), # 5817 (Compendium of Exhibits # 5817, Ex. D at 2-3). 4. Common Fund Cases In addition to the PSLRA, whether the percentage is appropriate here depends on the existence of a common fund. Although opining in Strong (not a PSLRA securities suit, but an antitrust action) that the Fifth Circuit generally uses the lodestar method to assess an attorney’s fee award in class actions, the Fifth Circuit distinguished that case by noting that the settlement in Strong had not produced “a traditional common fund”; specifically the panel highlighted the fact that the district court had “voiced concern that the $64 million ‘common fund’ figure was ‘illusory’ and refused to award anything in fees.” 137 F.3d at 852, 848. Recognizing that the United States Supreme Court applied the percentage method to determine fees in a common fund class action in Boeing Co. v. Van Gemert, 444 U.S. 472, 100 S.Ct. 745, 62 L.Ed.2d 676 (1980) (holding that as an exception to the American Rule that each litigant should bear his own attorney’s fees, “an attorney who recovers a common fund for the benefit of persons other than himself or his client is entitled to a reasonable attorney’s fee from that fund as a whole, including the unclaimed portion”), the Fifth Circuit questioned whether Boeing “has any application to a case such as this one, which uses the lodestar method,” but declined to resolve that question. 137 F.3d at 852. Since there was no traditional common fund, the panel observed that “several courts have advocated the use of the lodestar method in lieu of the percentage of fund method precisely in the situation where the value of the settlement is difficult to ascertain, reasoning that there is a strong presumption that the lodestar is a reasonable fee.” Id. at n. 5. It thus implied that the percentage method might be proper or more appropriate where each member of the class had an “undisputed and mathematically ascertainable claim to part of a judgment.” Id. at 852, quoting Boeing, 444 U.S. at 479, 100 S.Ct. 745. In several post-Strong cases, the trial judges have followed the suggestion in Strong that the Fifth Circuit may recognize the propriety of applying the percentage method where “each member of the class has an ‘undisputed and mathematically ascertainable claim to part of [a] judgment.’ ” Shaw, 91 F.Supp.2d at 967-68, quoting Harrah’s, No. Civ. A. 95-3925, 1998 WL 832574, *3-4 (quoting Strong, 137 F.3d at 852) (quoting Boeing Co., 444 U.S. at 479, 100 S.Ct. 745). In contrast to the unusual situation in Strong, in the Newby settlement the requested fees would come from a traditional common fund in which each member of the class has an “undisputed and mathematically ascertainable claim to part of a judgment.” Id. Thus under Strong, using a percentage method in this common fund case would appear to be proper. 5. Hybrid Approach Yet the Fifth Circuit has several times come out with blanket pronouncements that it uses the lodestar method to assess attorneys’ fees in class action suits, without mentioning a common fund or applying it to a PSLRA case. See, e.g., Strong, 137 F.3d at 850; High Sulfur, 517 F.3d at 228. As noted, none of these cases was a securities class action under the PSLRA. In the wake of this uncertainty, some lower court in this Circuit, as well as the Tenth and Eleventh Circuit Courts of Appeals, have applied a hybrid approach, using some combination of a percentage and a “lodestar check.” See, e.g., In re Educational Testing Service Praxis Principies of Learning and Teaching: Grades 7-12 Litigation, 447 F.Supp.2d 612, 629 (E.D.La.2006) (“Under Fifth Circuit law, the Court has the flexibility to calculate fees based on the percentage method as long as it combines its determination with some analysis under the lodestar method.”); In re Bayou Sorrel Class Action, No. 6:04CV1101, 2006 WL 3230771, *3-4 (W-D.La. Oct.31, 2006) (using percentage fee award within Johnson framework); Shaw v. Toshiba America Information Systems, Inc., 91 F.Supp.2d 942, 968 (E.D.Tex.2000); In re Catfish Antitrust Litig., 939 F.Supp. 493, 500 (N.D.Miss.1996). The purpose of a lodestar cross-check of the results of a percentage fee award is to avoid windfall fees, i.e., to “ensure that the percentage approach does not lead to a fee that represents an extraordinary lodestar multiple.” In re Cendant Corp. Sec. Litig. (“Cendant I”), 264 F.3d 201, 285 (3d Cir.2001); In re Cendant Corp. Sec. Litig. (“Cendant II"), 404 F.3d 173, 188 (3d Cir.2005). “A cross-check is performed by dividing the proposed fee award by the lodestar calculation, resulting in the lodestar multiplier.” In re AT & T Corp., 455 F.3d 160, 164 (3d Cir.2006). “The multiplier represents the risk of the litigation, the complexity of the issues, the contingent nature of the engagement, the skill of the attorneys, and other factors.” In re Global Crossing Sec. & ERISA Litig., 225 F.R.D. 436, 468 (S.D.N.Y.). Since the multiplier can then be “adjusted to account for particular circumstances, such as the quality of representation, the benefit obtained for the class, the complexity and novelty of the issues presented, and the risks involved,” if the court considers the multiplier too great, it should reduce the award. Id. at 164 & n. 4. It can also upwardly adjust the multiplier in rare and exceptional cases where such a modification is justified by specific evidence in the record and detailed findings by the court. Id. The “multiplier need not fall within any predefined range, provided that the District Court analysis justifies the award.” Rite Aid, 396 F.3d at 307. “The lodestar crosscheck serves the purpose of alerting the trial judge that when the multiplier is too great, the court should reconsider its calculation under the pereentage-of-recovery method, with an eye toward reducing the award. Even when the lodestar method is used only as a cross-check, ‘courts must take care to explain how the application of a multiplier is justified by the facts of a particular case.’ ” Id., at 306, quoting In re Prudential Ins. Co. America Sales Practice Litig. Agent Actions, 148 F.3d 283, 333 (3d Cir.1998); In re Cendant Corp. PRIDES Litig., 243 F.3d 722, 742 (3d Cir.2001). It may be appropriate for the court to consider multipliers used in comparable cases. Rite Aid, 396 F.3d at 307 n. 17. The Third Circuit observed that “ ‘[mjulti-ples from one to four are frequently awarded in common fund cases when the lodestar method is applied.’ ” PRIDES, 243 F.3d at 742, quoting Prudential, 148 F.3d at 341, quoting in turn 3 Herbert Newberg & Alba Conte, Newberg on Class Actions, § 14.03 at 14-15 (3d ed.1992). In the Rite-Aid litigation, the district court ultimately awarded a lodestar multiplier of 6.96. In re Rite Aid Sec. Litig., 362 F.Supp.2d 587 (E.D.Pa.2005) (awarding 25% of the settlement fund of $126,800,000 and 6.96 multiplier). In Vizcaino v. Microsoft Corp., 290 F.3d 1043, 1051 n. 6 (9th Cir.2002), the Ninth Circuit performed a survey of multipliers and found “a range of 0.6-19.6, with most (20 of 24, or 83%) from 1.0 and 4.0 and a bare majority (13 of 24, or 54%) in the 1.5-3.0 range.” Nevertheless, insisting that the court must consider all relevant circumstances in determining the amount of a fee award, the Ninth Circuit affirmed the district court’ increase of the standard benchmark of 25% to 28% in the fee award because of exceptional results, high risk, the wide-spread benefits of the litigation, and the market rate. Id. at 1048-49. The Third Circuit is lenient in the kind of cross-check required: “The lodestar cross-check calculation need entail neither mathematical precision nor bean-counting. The district courts may rely on summaries submitted by the attorneys and need not review actual billing records.” Rite Aid, 396 F.3d at 306-07. The Second Circuit has also concluded, “[W]here used as a mere cross-check, the hours documented by counsel need not be exhaustively scrutinized by the district court.” Goldberger v. Integrated Resources, Inc., 209 F.3d 43, 50 (2d Cir.2000), citing In re Prudential Ins. Co. Am. Sales Litig., 148 F.3d 283, 342 (3d Cir.1998). Instead, the court can measure the claimed lodestar by its own familiarity with the case. Goldberger, 209 F.3d at 50. The Fifth Circuit has never indicated that it would relax a lodestar calculation, so this Court has performed a detailed examination in spot checks of the records, though not exhaustive examination of each entry, relying also on the affidavits and declarations submitted by Class Counsel, and has used the Johnson factors endorsed by the Fifth Circuit. As a variation on the percentage calculation, some district judges first establish a benchmark and then adjust it down or up based on analysis of the Johnson factors. Shaw, 91 F.Supp.2d at 968. See, e.g., Harrah’s, 1998 WL 832574 (setting a benchmark fee of twenty-five percent and adjusting it according to Johnson factors, including time expended); In re Lease Oil Antitrust Litig., 186 F.R.D. 403, 447-48 (S.D.Tex.1999) (25% benchmark). A few Circuit Courts of Appeals utilize a percentage of fund method with a lodestar crosscheck to evaluate a fee request in a common fund case. See, e.g., In re AT & T Corp., 455 F.3d 160, 164 (3d Cir.2006); United States v. 8.0 Acres of Land, 197 F.3d 24, 33 (1st Cir.1999). See also Masters v. Wilhelmina Model Agency, Inc., 473 F.3d 423, 436 (2d Cir.2007) (affirming district court’s percentage of fund method cross-checked by application of the lodestar method to determine reasonable fee award, but also permitting courts to use the lodestar approach alone in common fund cases); Vizcaino v. Microsoft Corp., 290 F.3d 1043, 1047, 1050 (9th Cir.2002) (concluding that the district court has the discretion to choose either the percentage or the lodestar method and proving the district court’s application of the lodestar method as a cross-check of the percentage method). 6. Megafund Rule Some courts have recognized a “mega-fund rule” requiring a fee percentage to be capped at a low figure when the recovery is quite high, but the appellate courts that have examined such an approach have rejected it as a blanket rule. See, e.g., In re Synthroid Mktg. Litig., 264 F.3d 712, 718 (7th Cir.2001) (court must award counsel at the market rate for legal services); Rite Aid Corp., 396 F.3d at 303-03 & n. 12 (while Third Circuit has held that “it may be appropriate for percentage fees awarded in large recovery cases to be smaller in percentage terms than those with smaller recoveries ... [b]ut there is no rule that a district court must apply a declining percentage reduction in every settlement involving a sizeable fund”; endorsing instead a fact-intensive analysis). A mechanical, a per se application of the “megafund rule” is not necessarily reasonable under the circumstances of a case. The Fifth Circuit does not appear to have addressed the issue of capping attorney’s fees in a mega-fund class action, no less a post-PSLRA megafund securities class action, but the megafund rule is contrary to the Fifth Circuit’s approach that the district court scrutinize each case for the particular facts that will determine what constitutes a reasonable fee award. See also Rite Aid, 396 F.3d at 302 (“[T]here is no rule that a district court must apply a declining percentage reduction in every settlement involving a sizeable fund. Put simply, the declining percentage concept does not trump the fact-intensive ... analysis. We have generally cautioned against overly formulaic approaches in assessing and determining the amounts and reasonableness of attorney’s fees.”). A firm charging a higher fee may earn proportionally more for the class than one that charges less. See, e.g., Third Circuit Task Force Report, 108 F.R.D. 340, 373 (2002). A number of district courts have also rejected a rule requiring decreasing the fee percentage as the recovery grows larger. See, e.g., Allapattah Services, Inc. v. Exxon Corp., 454 F.Supp.2d 1185, 1212-13 (S.D.Fla.2006) (and cases cited therein); Stop & Shop Supermarket Co. v. SmithKline Beecham Corp., No. Civ. A. 03-4578, 2005 WL 1213926, *9-10 (E.D.Pa. May 10, 2005) (rejecting formulaic application of declining reduction to award of attorneys’ fees). 7. Reasonable Hourly Rate As noted, the lodestar is calculated by multiplying the number of hours reasonably expended by the reasonable hourly rate in the community for such legal services rendered by attorneys of comparable skill, experience, and reputation. Alberti v. Klevenhagen, 896 F.2d 927, 936, vacated in part on other grounds, 903 F.2d 352 (5th Cir.1990) (vacating its own reversal of district court’s enhancement of the hourly rate for case undesirability and affirming as reasonable that enhancement to attract qualified counsel); Heidtman v. County of El Paso, 171 F.3d 1038, 1043 (5th Cir.1999) A reasonable hourly rate should be in accord with rates “prevailing in the community for similar services by lawyers of reasonably comparable skill, experience and reputation.” Blum v. Stenson, 465 U.S. 886, 895-96 n. 11, 104 S.Ct. 1541, 79 L.Ed.2d 891 (1984). “A reasonable hourly rate is determined with reference to the prevailing market rate in the relevant legal community for similar work.... While the hourly rate must be ‘adequate to attract competent counsel,’ the ‘measure is not the rates which lions at the bar may command.’ ” Coleman v. Houston Independent School District, 202 F.3d 264, 1999 WL 1131554 (5th Cir.1999) (Table) (available on West-law), citing Leroy v. City of Houston, 906 F.2d 1068, 1079 (5th Cir.1990). The relevant legal community is the one in which the district court sits, no matter how much of the work is done elsewhere. Green v. Administrators of Tulane Educational Fund, 284 F.3d 642, 662 (5th Cir.2002), abrogated on other grounds, Burlington N. & Santa Fe Ry. Co. v. White, 548 U.S. 53, 126 S.Ct. 2405, 165 L.Ed.2d 345 (2006). In addition to the community rate, the district court must also consider the attorneys’ regular rates. Louisiana Power & Light Co. v. Kellstrom, 50 F.3d 319, 328 (5th Cir.1995). There is a strong presumption that the lodestar is a reasonable fee, and the fee applicant bears the burden of demonstrating that an adjustment by application of the Johnson factors is necessary to calculate a reasonable fee. Walker v. Dept. of HUD, 99 F.3d 761, 771 (5th Cir.1996). 8. Johnson Factors and the Multiplier The twelve Johnson factors are (I) the time and labor required; (2) the novelty and difficulty of the issues; (3) the skill required to perform the legal service adequately; (4) the preclusion of other employment by the attorney because he accepted this case; (5) the customary fee for similar work in the community; (6) whether the fee is fixed or contingent; (7) time limitations imposed by the client or the circumstances; (8) the amount involved and the results obtained; (9) the experience, reputation, and ability of the attorneys; (10) the undesirability of the case; (II) the nature and length of the professional relationship with the client; and (12) awards in similar cases. Johnson, 488 F.2d at 717-19. While the lodestar is relevant to determining a fee award, it is not the sole basis for determining that award; the Johnson factors are applicable to deciding whether the lodestar is reasonable, as well as to adjusting that award by a multiplier once the lodestar is calculated. Abrams v. Baylor College of Medicine, 805 F.2d 528, 536 (5th Cir.1986) (“The time and hours spent on a case are a necessary ingredient in determining a fee award, but they should not be the sole basis for determining a fee. The Johnson factors govern the determination of reasonableness itself; they are not merely factors to be considered in adjusting the award once the lodestar is calculated.”), citing Johnson v. Georgia Highway Express, 488 F.2d at 717. Compensable hours, reasonably spent, are determined from the attorney’s time records. Hensley v. Eckerhart, 461 U.S. 424, 434, 103 S.Ct. 1933, 76 L.Ed.2d 40 (1983). Usually courts require the applicant to provide contemporaneous time or billing records or other documentation which the district court must examine and discern which hours are compensable and which are not. Louisiana Power & Light Co. v. Kellstrom, 50 F.3d 319, 324 (5th Cir.), cert denied, 516 U.S. 862, 116 S.Ct. 173, 133 L.Ed.2d 113 (1995). Counsel must “exclude from a fee request hours that are excessive, redundant, or otherwise unnecessary .... ” Id. The fee applicant bears the burden of showing that the hours claimed were reasonably expended. Hensley, 461 U.S. at 437, 103 S.Ct. 1933. See also Saizan v. Delta Concrete Products Company, 448 F.3d 795, 799 (5th Cir.2006) (“[Plaintiffs seeking attorney’s fees are charged with the burden of showing the reasonableness of the hours billed and, therefore, are also charged with proving they exercised billing judgment. Billing judgment requires documentation of the hours charged and of the hours written off as unproductive, excessive, or redundant. The proper remedy for omitting evidence of billing judgment does not include a denial of fees but, rather, a reduction of the award by a percentage intended to substitute for the exercise of billing judgment, [footnotes omitted]”). See also Louisiana Power, 50 F.3d at 324-25 (“[T]he documentation must be sufficient for the court to verify that the applicant has met its burden .... [A] district court may reduce the number of hours awarded if the documentation is vague or incomplete.... Failing to provide contemporaneous billing statements does not preclude an award of fees per se as long as the evidence produced is adequate to determine reasonable hours.”); Saizan, 448 F.3d at 799, 800 (billing judgment requires documentation of the hours charged and of the hours written off as duplicative, unproductive . or excessive; finding the district court did not commit clear error in finding a failure to produce evidence of billing judgment nor abuse its discretion by imposing a ten percent reduction in the lodestar because of that failure). Furthermore, “[i]f more than one attorney is involved, the possibility of duplication of effort along with the proper utilization of time should be scrutinized. The time of two or three lawyers in a courtroom or conference when one would do may be obviously discounted.” Abrams, 805 F.2d at 535. “[H]ours ... spent in the passive role of an observer while other attorneys perform” are usually not billable. Flowers v. Wiley, 675 F.2d 704, 705 (5th Cir.1982), quoted in Coleman, 202 F.3d at 264, 1999 WL 1131554 (Table, available on Westlaw). “Litigants take their chances when submitting fee applications” without adequate information for the court to determine the reasonableness of the hours expended or with vaguely described tasks such as “review pleadings,” “correspondence,” or documents. Louisiana Power, 50 F.3d at 327. The hourly rate for attorneys should not be applied to clerical, secretarial or administrative work, since these are part of office overhead. Reyes v. Spur Discount Store No. 4, Civ. A. No. 07-2717, 2007 WL 2571905, *3 & nn. 19-20 (E.D.La. Aug.31, 2007); Abrams, 805 F.2d at 536 (court should consider whether the work performed was “ ‘legal work in the strict sense,’ or was merely clerical work that happened to be performed by a lawyer.”), quoting Johnson v. Georgia Highway Express, 488 F.2d at 717. “[I]nvestigation, clerical work, compilation of facts and statistics and other work which can often be accomplished by non-lawyers, but which a lawyer may do because he has no other help available ... may command a lesser rate. Its dollar value is not enhanced just because a lawyer does it.” Id. at 535. Work by paralegals may only be recovered to the extent that it is similar to that typically performed by attorneys; otherwise it is an unrecoverable overhead expense. Coleman, 202 F.3d 264, citing Allen v. United States Steel Corp., 665 F.2d 689, 697 (5th Cir. Unit B 1982). Generally in the Fifth Circuit the determination of a reasonable hourly rate for attorneys in a particular community is established by affidavits of other attorneys of similar caliber practicing in that community. Watkins v. Fordice, 7 F.3d 453, 458 (5th Cir.1993); Tollett v. City of Kemah, 285 F.3d 357, 368 (5th Cir.2002). “The evidence to support an hourly rate entails more than an affidavit of the attorney performing the work but must also address the rates actually billed and paid in similar lawsuits.” Watkins v. Input/Output, Inc., 531 F.Supp.2d 777, 784 (S.D.Tex.2007). As noted, based on one or more Johnson factors, the court may apply a multiplier to adjust the lodestar up or down if that factor or factors are not already taken into account by the lodestar, itself. Strong, 137 F.3d at 850. An adjustment may only be made if the Johnson factor has not already been accounted for in the lodestar. In re Fender, 12 F.3d 480, 487 (5th Cir.), cert. denied, 511 U.S. 1143, 114 S.Ct. 2165, 128 L.Ed.2d 888 (1994); Shipes v. Trinity Indus., 987 F.2d 311, 320 (5th Cir.) (“[T]he district court must be careful ... not to double count a Johnson factor already considered in calculating the lodestar when it determines the necessary adjustments.”), cert. denied, 510 U.S. 991, 114 S.Ct. 548, 126 L.Ed.2d 450 (1993). Four of the Johnson factors are presumably included in the lodestar calculation: the novelty and complexity of the issues, the special skill and experience of counsel, quality of representation, and the results obtained from the litigation. Blum v. Stenson, 465 U.S. 886, 898-99, 104 S.Ct. 1541, 79 L.Ed.2d 891 (1984); Shipes, 987 F.2d at 320. “Although upward adjustments of the lodestar figure based on these factors are still permissible, such modifications are proper only in certain rare and exceptional cases supported by specific evidence on the record and detailed findings by the lower courts.” Id.; see also Walker, 99 F.3d at 771, citing Alberti v. Klevenhagen, 896 F.2d 927, 936 (citing Pennsylvania v. Delaware Valley Citizens’ Council for Clean Air (“Delaware Valley I"), 478 U.S. 546, 564-65, 106 S.Ct. 3088, 92 L.Ed.2d 439 (1986)) (quoting Blum v. Stenson, 465 U.S. 886, 898-900, 104 S.Ct. 1541, 79 L.Ed.2d 891 (1984)); DeHoyos v. Allstate Corp., 240 F.R.D. 269, 323-24 (W.D.Tex.2007). The Fifth Circuit has also held that two other factors, time limitations imposed by the client or the circumstances and preclusion of other employment, are generally subsumed in the lodestar calculation, too. Shipes, 987 F.2d at 321-22; Heidtman v. City of El Paso, 171 F.3d 1038, 1043 (5th Cir.1999). Increasing the fee award based on the eighth factor (the amount involved and the results obtained) is only proper when the applicant shows that “it is customary in the area for attorneys to charge an additional fee above their hourly rates for an exceptional result .... ” Shipes, 987 F.2d at 322. The Shipes panel did state that “enhancement due to the results obtained may be warranted.” Id. at 321. 9. Enhancement: City of Burlington v. Dague and Fee-Shifting-Statute versus Common-Fund Cases Relating to the sixth Johnson factor, whether the fee is fixed or contingent, in City of Burlington v. Dague, 505 U.S. 557, 567, 112 S.Ct. 2638, 120 L.Ed.2d 449 (1992), the Supreme Court has held that enhancement of the lodestar by a multiplier based on the contingent nature of a fee is not allowed when fees are awarded to plaintiffs’ counsel under fee-shifting provisions of statutes. Several Circuit Courts of Appeals and some district courts that have examined the language in Dague and the policy behind its holding have concluded that because of key differences between fee-shifting and common-fund cases, Dague does not apply to common-fund class action settlement cases. The leading case is Florin v. Nationsbank, N.A., 34 F.3d 560, 564-65 (7th Cir.1994). This Court is persuaded by the reasoning in Florin and progeny. In Dague, the Supreme Court reiterated its earlier rulings that in typical federal statutory fee-shifting cases there is a “strong presumption” that the lodestar by itself represents a “reasonable fee” and that an applicant seeking more money must establish that “ ‘such an adjustment is necessary to the determination of a reasonable fee.’ 505 U.S. at 562, 112 S.Ct. 2638, citing Pennsylvania v. Delaware Valley Citizens’ Council for Clean Air, 483 U.S. 711, 733, 107 S.Ct. 3078, 97 L.Ed.2d 585 (1987), and Blum v. Stenson, 465 U.S. at 898, 104 S.Ct. 1541. Opining that “an enhancement for contingency would likely duplicate in substantial part factors already subsumed in the lodestar, the high court noted that the risk of losing a case is the product of two factors: the relative legal and factual merits of the claim and the difficulty of demonstrating those merits”. Id. at 562, 112 S.Ct. 2638. The latter factor is usually subsumed in the lodestar, either in the number of hours expended on the suit or in the hour rate of the attorney adequately skilled and experienced to prove those merits. Id. The first factor is not subsumed in the lodestar, but the Supreme Court found good reason it should not be used to enhance the lodestar figure. Id. Because relative merits are a factor in every case since no claim has a 100% chance of success, “computation of the lodestar would never end the court’s inquiry in contingent-fee cases.” Id. Furthermore, the consequence of awarding contingency enhancement to take account of this ‘merits’ factor would be to provide attorneys with the same incentive to bring relatively meritless claims as relatively meritorious ones. Assume, for example, two claims, one with underlying merit of 20%, the other of 80%. Absent any contingency enhancement, a contingent-fee attorney would prefer to take the latter, since he is four times more likely to be paid. But with a contingency enhancement, this preference would disappear: the enhancement for the 20% claim would be a multiplier of 5 (100/20), which is quadruple the 1.25 multiplier (100/80) that would attach to the 80% claim. Thus, enhancement for the contingency risk posed by each case would encourage meritorious claims to be brought, but only at the social cost of indiscriminately encouraging nonmerito-rious claims to be brought as well. Id. at 563, 112 S.Ct. 2638. Previously, in Delaware Valley, 483 U.S. at 725, 107 S.Ct. 3078, in a “closely related” argument that the Dague Court expressly adopted, 505 U.S. at 567, 112 S.Ct. 2638, Justice White had insisted that because contingency enhancement is based on the weakness of the plaintiffs case, it “penalizes the defendants who have the strongest case; and in theory, at least, would authorize the highest fees in cases least likely to be won and hence encourage the bringing of more risky cases.... ” The Dague Court’s commented that the fee-shifting statutes were not intended to act “ ‘as a form of economic relief to improve the financial lot of lawyers.’ ” Id. at 563, 112 S.Ct. 2638 [citation omitted]. Instead, discussing reasons why contingency enhancement is incompatible with typical fee-shifting statutes, the Supreme Court in Dague observed that the fee-shifting statutory language usually limits fee awards to “prevailing,” or substantially prevailing, parties, and thus bars a prevailing plaintiff from recovering fees on claims on which he lost; therefore “it should bar a prevailing plaintiff from recovering for the risk of loss.” Dague, 505 U.S. at 565, 112 S.Ct. 2638, citing Hensley v. Eckerhart, 461 U.S. 424, 103 S.Ct. 1933, 76 L.Ed.2d 40, and Delaware Valley, 483 U.S. at 719-20, 107 S.Ct. 3078. An attorney working on a contingency basis usually pools the risks of his various cases and relies on those in which he is successful to pay for the time he risked on those which were not. Therefore, under a fee-shifting statute, enhancing a lodestar for risk “would in effect pay for the attorney’s time (or anticipated time) in cases where his client does not prevail.” Id. The Supreme Court, noting that it has “generally turned away from the contingent-fee model ... to the lodestar model” in determining fee awards under fee-shifting statutes, concluded that engrafting a contingency enhancement onto a lodestar model would result in “a hybrid scheme that resorts to the contingent-fee model to increase a fee award but not to reduce it. Contingency enhancement is therefore not consistent with our general rejection of the contingent-fee model for fee awards, nor is it necessary to the determination of a reasonable fee.” 505 U.S. at 565-66, 112 S.Ct. 2638. In Florin, brought under the Employee Retirement Income Security Act (“ERISA”) and relying heavily on Skelton v. General Motors Corp., 860 F.2d 250 (7th Cir.1989), the Seventh Circuit focused on a fee award to be paid, under equitable principles, out of a common fund created by a settlement of a class action suit, and not under ERISA’s fee-shifting provision, 29 U.S.C. § 1132(g). 34 F.3d at 563. At issue was whether the district court had abused its discretion by failing to award appellants a multiplier for risk. Id. The district court had calculated a lodestar using counsel’s usual hourly rate and the hours documented by the attorneys, but found that there was “no compelling reason” to apply a risk multiplier requested by the attorneys. Acknowledging that Da-gue “has been interpreted to preclude generally the use of risk multipliers in fee-shifting cases,” the Seventh Circuit concluded that “Dague, by its terms, applies only to statutory fee-shifting cases, and its reasoning is largely based on the statutory language of fee-shifting provision”; moreover the policy considerations informing the Dague decision “have little force in common fund cases.” Id. at 564. Earlier, in Skelton, the Seventh Circuit opined that in statutory fee-shifting cases, awarding risk multipliers to prevailing plaintiffs may unfairly burden defendants because the risk multipliers have a tendency to penalize those with the strongest defenses, which increase the risk for the attorney bringing the suit. Skelton, 860 F.2d at 253. In a common fund case this inequitable burden on defendants will not exist because the plaintiff class is responsible for compensating its attorneys by sharing in its recovery. Id. Furthermore, in the fee-shifting context, “assessing risk multipliers against losing defendants in effect requires these defendants to ‘subsidize’ plaintiffs’ lawyers for