Citations
- 900 F. Supp. 2d 467
Full opinion text
OPINION
WOLFSON, District Judge:
Presently before the Court is a motion to approve the final settlement reached between Plaintiffs-shareholders and nominal Defendant J & J Corporation (“J & J”) in several consolidated shareholder derivative actions, as well as motions to intervene and dismiss by an objector to the settlement. Through the settlement, J & J agrees to institute corporate governance changes and pay up to $10 million in attorney’s fees and $450,000 in costs, subject to this Court’s approval. For the following reasons, the Court will approve the settlement and appoint a special master to aid the Court in determining reasonable attorney’s fees and costs. The Court denies the objector’s motions to intervene and to dismiss.
1. BACKGROUND
A. Overview
This consolidated shareholder derivative action is a merger of several suits — eight separately filed demand-futility suits , and two suits by plaintiffs who filed demand letters with J & J requesting, inter alia, that J & J institute litigation against members of its Board of Directors (“the Board”), but these requests were refused. I refer to these groups, respectively, as “Demand-Futility Plaintiffs” and “Demand Refused Plaintiffs.” I refer to all suits collectively as “the Derivative Suits.”
For a more complete factual background leading up to the filing of these suits, as well as the substantive allegations of the demand-futility complaint, the Court refers to its prior opinion granting, without prejudice, J & J’s motion to dismiss those complaints. Suffice it to say here that the Demand-Futility Plaintiffs alleged that there were “red flags,” such as Food and Drug Administration warning letters, that should have alerted the Board about three substantive categories of alleged corporate misconduct: (a) product recalls; (b) off-label marketing of drugs; and (c) illegal kick-backs. Those plaintiffs further alleged that J & J failed to comply with current good manufacturing practices, referred to as “cGMP.” The Demand-Futility Plaintiffs assert violations of Section 14(a) of the Exchange Act, as well as breach of fiduciary duty claims against the Board. The Demand Refused Plaintiffs assert similar claims.
B. Procedural History
From February through November 2010, several J & J shareholders submitted demand letters to the Board, demanding that the Board investigate, institute litigation, and take other remedial action regarding, inter alia, J & J’s product recalls, off-label drug marketing, illegal kickback schemes, and lack of good manufacturing practices. While these letters were in the process of being submitted, the Demand-Futility Plaintiffs filed their complaints, beginning with the first complaint filed on April 21, 2010 and ending with the final one filed on June 24, 2010.
Meanwhile, on April 22, 2010, the Board appointed a Special Committee, along with independent counsel, to consider the allegations of those shareholders who filed demand letters. The Special Committee was comprised of four independent directors who had recently joined the Board around the time the Committee was formed. Although the committee initially considered only the first-filed demand letters, on June 15, 2010, the Board expanded the committee’s mandate to include review of the allegations of the demand-futility complaints, along with any subsequently-received demand letters or derivative complaints. See Report of the Special Committee at 2-3.
On July 19, 2010, while the Special Committee was considering the aforesaid allegations, three of the shareholders who filed demand letters (Leslie Katz, Jeffrey Tarson and Joan Tarson) moved to intervene in the demand-futility actions in which counsel had moved for leave to consolidate. The demand-futility complaints were ultimately consolidated, by Order of this Court, on August 17, 2010. In that same order, the Court appointed as co-counsel the following firms: Carella, Byrne, Cecchi, Olstein, Brody & Agnello, P.C., Morris and Morris Counselors at Law LLC, Robbins Geller Rudman & Dowd LLP, and Bernstein Litowitz Berger & Grossmann LLP. Counsel stipulated to this arrangement, arguing that appointing them to a co-counsel organizational structure would ensure that their efforts were not duplicated and would streamline representation of all Demand-Futility Plaintiffs. After the Court consolidated the demand-futility actions, the motion to intervene was administratively terminated pending the Special Committee’s decision. The Demand-Futility Plaintiffs then filed a consolidated amended complaint on December 17, 2010. A few months later, on February 21, 2011, J & J filed a motion to dismiss that complaint.
While the J & J motion to dismiss the demand-futility consolidated amended complaint was still pending, the Special Committee issued its report, on June 27, 2011. The Committee recommended that the Board not pursue litigation on behalf of J & J against any J & J Board member or executive. The Board subsequently adopted the Special Committee’s recommendation on July 11, 2011.
In addition, the Board adopted a series of internal controls designed to ensure that quality control and other issues that underlay the allegations of wrongful conduct in the Derivative Suits were reported upstream to the directors. Specifically, the Board accepted the Special Committee’s recommendation that the Regulatory and Compliance Committee be expanded in the following manner:
[The Committee should be] authorized to retain outside expert consultants, to assist the Committee in its work as the need arises. Among other things, the Regulatory and Compliance Committee, in consultation with management and an expert consultant, should develop metrics and a report card that would provide insight into and perspective on J & J’s Compliance systems and organizations. The new Committee should have an initial term of five years, commensurate with the McNeil Consent Decree. Members of the Special Committee will make themselves available to consult and confer with the members of the Regulatory and Compliance Committee, to provide the latter with the former’s insights gained as a consequence of its investigation.
Report of the Special Committee at 121.
Once the Special Committee’s report was filed, the Court granted the parties the opportunity to submit supplemental briefing on J & J’s motion to dismiss. Thereafter, on July 28, 2011, the Court heard oral argument on the motion and reserved its ruling for a formal opinion. Also at the hearing, the Court addressed the previously-administrative terminated motion to intervene by the Demand Refused Plaintiffs, and denied that motion. Rather than consolidating those plaintiffs into the demand-futility action, the Court consolidated the suit brought by Leslie Katz, Jeffrey Tarson and Joan Tarson with one brought by another shareholder whose demand was refused — M.J. Copeland. These actions, together, comprise the Demand-Refused Plaintiffs. The Court appointed Abraham, Fruchter & Twersky, LLP as lead counsel, and Kantrowitz, Goldhamer & Graifman, P.C., as liaison counsel, for this group of plaintiffs.
After thoroughly considering the parties’ arguments and extensive briefing, on September 29, 2011, 865 F.Supp.2d 545 (D.N.J.2011), the Court issued a formal opinion granting J & J’s motion to dismiss without prejudice. The central question posed by the motion was whether the plaintiffs satisfied the Federal Rule of Civil Procedure 23.1 heightened pleading standard applicable solely to demand-futility actions. In granting J & J’s motion, the Court ruled that, while the complaint alleged the numerous “red flags” that the demand-futility plaintiffs believed should have alerted Board members to J & J’s alleged malfeasance, the plaintiffs did not sufficiently allege that the specific Board members actually had knowledge of those red flags.
The plaintiffs engaged in settlement negotiations with J & J following oral argument on the motion to dismiss but before the opinion was issued. Throughout the negotiations, the parties reviewed documents from their respective, multiple, experts and J & J provided informal discovery. In the parties’ initial negotiations, around August 31, 2011, Demand Futility Plaintiffs provided a settlement proposal to the Board that included both corporate governance reforms and a monetary payment to J & J. Joint Decl., ¶ 53. Demand Refused Plaintiffs also participated in the settlement negotiations. Id. at ¶ 56. However, once the Court granted J & J’s motion to dismiss on September 29, 2011, the Board was not willing to entertain a monetary component to the settlement and the negotiations from that point forward focused primarily on injunctive relief. See id. at ¶ 53-54, 60-61.
After seven months of negotiations, the parties entered into a proposed settlement agreement on July 11, 2012. Generally, Plaintiffs characterize these reforms as providing for adoption of management level systems and procedures designed to ensure early detection and remediation of all product-related issues. PI. Open. Br. at 2. The key features of the agreement are: (1) the adoption of a Quality and Compliance (“Q & C”) Core Objective; (2) the creation and adoption of a Regulatory, Compliance & Government Affairs Committee (“RCGC”); and (3) the implementation of a Product Risk Management (“PRM”) Standard, directed at all J & J products. Each of these components will be addressed in more detail below.
Plaintiffs then moved for preliminary approval of the settlement, which this Court granted by way of an Order dated July 16, 2012. In that Order, the Court also directed that all shareholders be notified of the proposed settlement and given the opportunity to object. The Court, further, set a final settlement hearing date of September 28, 2012. Following the Court’s order, Objector Mark Petri filed a motion to intervene in the Derivative Suits as well as a motion to dismiss, on August 31, 2012.
As the September 28, 2012 hearing date approached, the Court became aware that some individual investors had not received timely notice of the proposed settlement. To ensure that objections by late-notified individual investors could be heard, the Court ordered a second round of notices and adjourned the approval hearing to October 18, 2012.
Altogether, the Court received 15 objections, mostly focusing on the amount of fees sought by Plaintiffs’ counsel and agreed to by J & J, and one request to opt out of the settlement. The consensus amongst the objectors was that, though they question the merits of the Derivative Suit and what precise benefit the corporate governance reforms confer, the settlement should be approved in order to prevent J & J from incurring further litigation costs. Objector Petri raised more substantive challenges that will be discussed in connection with his motions to intervene and to dismiss. A few additional objectors adopted Petri’s substantive arguments as well.
The settlement approval hearing was held on October 18, 2012. At the hearing, the Court heard argument from Plaintiffs and objections by Petri, who was represented by counsel. No other objectors appeared. After considering the parties’ arguments, the Court indicated that it would approve the settlement and issue a formal opinion setting forth its reasons. With respect to attorney’s fees, the Court indicated that it would appoint a special master for reasons explained in the opinion.
C. Settlement Terms
As noted, the settlement includes: J & J’s adoption of the Quality and Compliance Core Objective, the creation of the Regulatory, Compliance & Government Affairs Committee; and (3) the implementation of a Product Risk Management Standard. I provide a brief synopsis of each reform.
Q & C Core Objective
The Q & C Core Objective is a Board commitment to create quality control and assurance systems that will prevent, timely detect, and correct noncompliance with drug marketing laws, cGMP regulations, and the PRM Standard. This objective is designed to remedy one of the core allegations in the Demand-Futility Plaintiffs’ suit — that the J & J Board insulated itself from the reckless and lackluster quality control systems present in J & J subsidiaries. One of the ways the objective does this is by creating company-wide control and assurance systems that are designed to effectively supplement J & J’s decentralized management approach.
According to Plaintiffs’ governance and compliance expert, former SEC Chairman Harvey L. Pitt, the Q & C Core Objective achieves several goals that are significant. First, the objective facilitates “the Board’s full understanding of the importance of imposing rigorous health care compliance and quality systems----” Pitt Decl., ¶ 68. Second, he opines that the objective confirms “the Board’s commitment that J & J’s operating companies must conduct their business activities in conformity with applicable laws, regulations, and internal policies.... ” Id. Third, he notes, the objective is “a Board-level direction” to the Company that it expects the Company to prevent and detect instances of noncompliance. Id. Similarly, Plaintiffs’ pharmaceutical quality control and product risk management expert, Dr. Mitchell Glass, agrees that adoption of the objective provides substantial benefit to J & J by sending “an important message to the enterprise regarding tone at the top,” and, further, acknowledges the importance of quality control systems at J & J. Glass Report, ¶ 21. Moreover, he finds it significant that the compensation and evaluations of J & J employees are tied to the objective.
Regulatory, Compliance & Government Affairs Committee
The RCGC, which is created by the settlement agreement, further assists the Board in overseeing J & J’s compliance with drug marketing laws and cGMP on a more centralized basis. By way of example, the RCGC Charter and Operating Procedure (“C/OP”) directs the Committee to assess the information it is receiving to support its oversight functions on an annual basis. See Stipulation of Settlement, Ex. A, Section III., A. Charter, Oversight of Committee Matters, ¶ 3. Under the C/OP, the Board must also annually review and approve J & J’s “internal audit plans related to compliance and quality.” Id. at Duties and Responsibilities of the Committee, ¶ 11.
Plaintiffs’ expert, Chairman Pitt, opines that the creation of this committee is historic in that it is the first time a standing committee was created to provide oversight over J & J’s compliance with regulations and internal policies. Pitt Deck, ¶ 72. He, further, highlights that this committee is comprised of at least three independent directors who should be unaffected by commercial pressures when carrying out their duties. Id. at 93. In his view, the committee will also unify the oversight of legal and regulatory compliance, and quality control, over J & J’s numerous operating companies. Id. Dr. Glass adds that the creation of the committee constitutes a best practice, and helps “provide a crucial foundation to support the robust implementation of [J & J’s internal controls, like the PRM Standard discussed below] and to empower key executives ... within the organization.” Glass Report, ¶ 32.
Product Risk Management Standard
Per the Stipulation, J & J agrees to design and implement a new PRM Standard, mandatory for all J & J subsidiaries. The PRM Standard is comprised of a Quality Policy and Quality Framework. Among other things, the standard will “set forth the independence and role of Quality personnel in the PRM process, and provide that all quality issues subject to the PRM Standard will be managed in accordance with the escalation reporting line defined in the Quality Policy.” Stipulation of Settlement, Ex. A, Section IV., A. New PRM Standard, ¶ 1. The design and implementation of the PRM Standard will rest with J & J’s Chief Quality Officer (“CQO”). He or she will, further, ensure that specific standards applicable to certain business sectors are designed and adopted. Id. The independent Enterprise Regulatory Compliance Group will serve as an additional oversight over the CQO. Id.
Having set forth the relevant background, I now turn to the parties’ motions. Currently, there are three motions before the Court: (A) a motion for final approval of settlement by the shareholder Plaintiffs, including the award of $10 million in attorney’s fees and $452.016.76 in costs; (B) a motion to intervene by Objector Mark Petri; and (C) a motion to dismiss by that same objector. I address Mr. Petri’s motions first and, thereafter, turn my attention to the fairness of the proposed settlement and the requested attorney’s fees.
II. MOTIONS TO INTERVENE AND DISMISS
Federal Rule of Civil Procedure 24 governs motions to intervene. Objector Mark Petri argues that he is entitled to intervene as of right for the purpose of asserting that the named plaintiffs do not adequately represent the class and, therefore, that the class action should not be certified and the suit dismissed. Alternatively, he moves for permissive intervention for the limited purpose of preserving his appellate rights.
A. Intervention as of Right
Subsection (a) of Federal Rule of Civil Procedure 24, which addresses intervention as of right, provides:
On timely motion, the court must permit. anyone to intervene who: (1) is given an unconditional right to intervene by a federal statute; or (2) claims an interest relating to the property or transaction that is the subject of the action, and is so situated that disposing of the action may as a practical matter impair or impede the movant’s ability to protect its interest, unless existing parties adequately represent that interest.
Fed.R.Civ.P. 24(a).
The Third Circuit has interpreted Rule 24(a)(2) to require proof of the following four elements from the applicant seeking to intervene: first, a timely application for leave to intervene;, second, a sufficient interest in the litigation; third, a threat that the interest will be impaired or affected, as a practical matter, by the disposition of the action; and fourth, inadequate representation of the prospective intervenor’s interest by existing parties to the litigation. Kleissler v. U.S. Forest Service, 157 F.3d 964, 969 (3d Cir.1998). “Failure to satisfy any one of these requirements is a sufficient ground to deny the application.” In re Bank of New York Derivative Litig., 320 F.3d 291 (2d Cir.2003) (quoting Catanzano by Catanzano v. Wing, 103 F.3d 223, 232 (2d Cir.1996) (internal quotation marks omitted)).
Plaintiffs do not dispute the first prong, ie., the timeliness of Petri’s motion to intervene. Nor do they dispute the third prong — whether there is a threat that the proposed intervenor’s interest will be impaired or affected, as a practical matter, by the disposition of the suit.
While these two prongs are met, Petri does not satisfy the second or fourth prongs. The second prong asks whether the proposed intervenor has a sufficient interest in the litigation. Courts in the Third Circuit have held that shareholders with only an economic interest in the outcome of the litigation do not have “sufficient interest,” reasoning that
allowing a current shareholder to intervene'in a securities class action settlement merely because the value of the common stock may be diluted would set a very dangerous precedent because it would sanction the intervention of any stockholder in any suit in which the trust or corporation whose stock the stockholder owns is a party.... The logical result of this would be that a corporation could not prosecute or settle any suit by or against it without obtaining the approval of every shareholder (and perhaps every holder of a debt instrument as well). Clearly the corporate entity was never intended to be so limited in its ability to make decisions and to act on them.
In re Cendant Corp. Sec. Litig., 109 F.Supp.2d 273, 277 (D.N.J.2000) (quoting Kusner v. First Pennsylvania Corp., 74 F.R.D. 606 (E.D.Pa.1977), aff'd, 577 F.2d 726 (3d Cir.1978) (Table); Landy v. Federal Deposit Ins. Corp., 486 F.2d 139 (3d Cir.1973); Swanson v. Traer, 249 F.2d 854 (7th Cir.1957); and Levin v. Mississippi River Corp., 59 F.R.D. 353 (S.D.N.Y.), aff'd, 486 F.2d 1398 (2d Cir.1973)) (internal quotation marks omitted). Cf. Liberty Mut. Ins. Co. v. Treesdale, Inc., 419 F.3d 216, 222 (3d Cir.2005) (concluding that party seeking proceeds from insurance company could not intervene as of right in insurance coverage dispute between company and third party because they had only a “mere economic interest in the outcome of litigation”). See also In re Community Bank of Northern Virginia, 418 F.3d 277, 315 (3d Cir.2005) (“[W]e are in no way suggesting that absent class members who merely express dissatisfaction with specific aspects of the proposed settlement or that attorneys (who, after finding one or more class members as clients, and wish to share in the forthcoming fee), have the right to intervene.”)
Petri relies on the Seventh Circuit’s recent decision in Robert F. Booth Trust v. Crowley, 687 F.3d 314 (7th Cir.2012), which held that an objecting shareholder was entitled to intervene as of right. Review of Crowley makes clear, however, that the basis of the court’s ruling was that, under Seventh Circuit law, “the only way [an objecting shareholder] can get appellate review is to become a party.” Id. at 318. The Third Circuit has no such rule, see In re Rite Aid Corp. Securities Litig., 396 F.3d 294, 298 (3d Cir.2005), thus, Crowley’s analysis does not attend here. Moreover, Petri acknowledged at oral argument that, under Third Circuit law, he does not need to intervene in order to preserve his appellate rights. Hrg. Tr. 28:24-29:5.
In addition', to the extent that Petri argues he should be granted intervention in order to pursue dismissal of the suit, courts have denied motions to intervene where the movant’s sole interest is in dismissing an action. See, e.g., Glover v. Ferrero USA, Inc., Civil Action No. 11-1086, 2011 WL 5007805, at *6 (D.N.J. Oct. 20, 2011); Worthington v. Bayer Healthcare LLC, Civil Action Nos. 11-2793, et al., 2011 WL 6303999, at *6 (D.N.J. Dec. 15, 2011).
As for the fourth prong of the intervention analysis, that prong addresses whether the prospective intervenor’s interest is adequately represented by existing parties to the litigation. Representation will be considered inadequate where, “although the applicant’s interests are similar to those of a party, they diverge sufficiently that the existing party cannot devote proper attention to the applicant’s interests.” Brody v. Spang, 957 F.2d 1108, 1123 (3d Cir.1992). In other words, “the proposed intervenor must ordinarily demonstrate adversity of interest, collusion, or nonfeasance on the part of a party to the suit.” In re Community Bank, 418 F.3d at 315.
Petri argues that his interests are not adequately represented by the named shareholders and is, indeed, contrary to their interest as he seeks outright dismissal of the Derivative Suits in order to save J & J from incurring further litigation costs. Although Petri contends that his ultimate objective is to dismiss the suit, in more general terms, his objective (as is the objective of all shareholders) is for the corporation to succeed, comply with governing laws, and be profitable. Keeping this larger objective in mind, Petri’s interests are not unaligned with the named plaintiffs. Rather, his dispute with the named plaintiffs boils down to litigation and management strategy — he would have preferred that the suit not have been brought. However, “[t]hat [intervenors] would have been less prone to agree to the facts and would have taken a different view of the applicable law does not mean that the [current parties] did not adequately represent their interests in the litigation.” Pennsylvania v. Rizzo, 530 F.2d 501, 505 (3d Cir.1976) (internal quotations omitted).
In addition, most adequacy of representation contentions involve derivative plaintiffs who fail to vigorously prosecute the claim against the Board, or who are so antagonistic to a nonnamed plaintiff shareholders that they “disregard their interests.” Greco v. Local.com Corp., 806 F.Supp.2d 653, 658-59 (S.D.N.Y.2011). Here, in contrast, Petri appears to argue that the named plaintiffs have disregarded his interest in having the suit dismissed, yet he acknowledges that settling the suit will have the same effect of freeing J & J from incurring any additional litigation costs. Thus, whether through dismissal or settlement, his goal of decreasing losses will be realized. This demonstrates that his interests are not “disregarded” by the named plaintiffs. Moreover, in acknowledging that settlement also benefits the corporation, Petri reveals his true point of contention — the amount of attorney’s fees sought by Plaintiffs’ counsel. As noted, Petri does not need to intervene in order to voice his objection to fees, and I will consider these objections in detail below.
To the extent Petri hinges his motion on alleged collusion between class counsel, the named plaintiff-shareholders, and J & J, he must do more than simply point to an agreement to a sizeable fee award; he points to no facts in the record to support his contention. See In re Community Bank, 418 F.3d at 315 (declining to find, based solely on proposed intervenor’s assertion, that collusion existed where class counsel “failed to assert, inter alia, what appear to be facially viable TILA and HOEPA claims, conducted no formal discovery, and negotiated an extremely generous fee” but remanded to district court to develop a “full record” on the issue of adequate representation); Salovaara v. Jackson Nat. Life Ins. Co., 246 F.3d 289, 297 (3d Cir.2001) (“Salovaara has not shown the existence of any improper collusion or bad faith in reaching this [derivative settlement] Agreement.”) (emphasis added). Moreover, case law explains that there are other remedies available to Petri “if he believes [the Board] breached a duty towards the shareholders by entering into the Settlement.” Salovaara, 246 F.3d at 297.
In short, through his role as an objector, Petri can protect his own interests in chailenging the fairness of the proposed settlement. As a J & J shareholder, he, like any other “class member may object to a pro-posted settlement]....,” Fed.R.Civ.P. 28(e)(5), and, if unsuccessful in challenging the settlement, he may appeal. Indeed, he has filed a separate objection that the Court will consider in addressing the merits of the settlement. And, Petri acknowledged at oral argument that his objections mirror the substantive arguments he would advance as an intervenor. Hrg. Tr. 29:6-10. Accordingly, Petri’s motion to intervene as of right is denied.
B. Permissive Intervention
Pursuant to Fed.R.Civ.P. 24(b), a person or an entity, who is not a named party in an action, may seek to intervene in the interested litigation. See PA Prison Soc. v. Cortes, 622 F.3d 215, 232 (3d Cir.2010). Rule 24(b) provides:
[U]pon timely application anyone may be permitted to intervene in an action ... when an applicant’s claim or defense and the main action have a question of law or fact in common.... In exercising its discretion the court shall consider whether the intervention will unduly delay or prejudice the adjudication of the rights of the original parties.
Fed.R.Civ.P. 24(b). In short, then, a proposed intervenor must show that: (1) its motion is timely; (2) it has questions of law or fact in common with the anchoring suit; and (3) intervention will not cause undue delay or prejudice for the original parties. If a third party can satisfy all of these requirements, the court may, in its discretion, grant that third party permissive intervention.
I will not grant Petri permission to intervene under Rule 24(b). For one, as stated above, Petri does not need to intervene in order to perfect his right to appeal. Moreover, granting Petri’s motion to intervene will cause some delay in requiring this Court to render a decision on his motion to dismiss. In addition, were his motion to dismiss granted, it would prejudice the adjudication of the rights of the original parties — all of whom seek to settle the instant litigation rather than have it dismissed. As noted, J & J has filed a motion to dismiss the Demand Refused Plaintiffs’ complaint, yet, while that motion was pending, entered into the instant settlement. Thus, it is clear that both parties favor an amicable resolution to this matter. Furthermore, addressing Petri’s motion to dismiss would add “superfluous and add unnecessary complexities that could potentially cause undue delay in the resolution of this case” as the substantive challenges raised in his motion can be addressed as objections to the settlement. PA Prison Soc. v. Cortes, 622 F.3d 215, 232 (3d Cir.2010). As noted, Petri conceded as much at oral argument. Finally, while Petri’s challenges certainly share common questions of fact with the derivative suit, this commonality undermines application for permissive intervention, because this is not a situation where he seeks to intervene to assert his own rights. Rather, he seeks to assert the rights of J & J, whose interests are already represented by the Board. Accordingly, Petri’s request to intervene pursuant to Rule 24(b) is denied.
Having denied Petri’s motion to intervene, I do not reach his motion to dismiss. As suggested above, I treat the substantive challenges he raises in his motion as objections and address them in connection with my ruling on the fairness of the proposed settlement. To that issue, I now turn.
III. MOTION TO APPROVE SETTLEMENT
Under Federal Rule of Civil Procedure 23.1, parties to a shareholder derivative action must obtain the Court’s approval to settle. The Court must find that the settlement is “fair, adequate, reasonable and proper, and in the best interests of the class and the shareholders.” Bell Atlantic Corp. v. Bolger, 2 F.3d 1304, 1310, 1317 (3d Cir.1993). While the shareholders’ interest is relevant, the Third Circuit has made clear, that the “principal factor” to be considered “is the extent of the benefit to be derived from the proposed settlement by the corporation, the real party in interest.” Shlensky v. Dorsey, 574 F.2d 131, 147 (3d Cir.1978) (citations omitted).
A. Settlement Approval Standard
To assess the fairness of the settlement, the Court must consider the following factors, referred to by courts as the “Girsh ” factors:
(1) the complexity, expense and likely duration of the litigation; (2) the reaction of the shareholders to the settlement; (3) the stage of the proceedings and the amount of discovery completed; (4) the risks of establishing liability; (5) the risks of establishing damages; (6) the risks of maintaining the derivative action through the trial; (7) the ability of the defendants to withstand a greater judgment; (8) the range of reasonableness of the settlement agreement in light of the best possible recovery; and (9) the range of reasonableness of the settlement fund to a possible recovery in light of all the attendant risks of litigation.
Girsh v. Jepson, 521 F.2d 153, 157 (3d Cir.1975) (quotation omitted); see also Shlensky, 574 F.2d at 147 (applying the Girsh factors in the context of a shareholder derivative action). Ultimately, the decision to grant or deny approval of a settlement rests within the discretion of the Court, Shlensky, 574 F.2d at 147, and the Court “is free to consider other relevant circumstances and facts involved in [the] settlement.” Plymouth County Contributory Retirement System v. Hassan, Civ. Action No. 08-1022(DMC), 2012 WL 664827, at *2 (D.N.J., Feb. 28, 2012).
Before turning to may application of the Girsh factors, I first explain what distinguishes shareholder derivative actions from the typical class action.
Derivative suits are the procedural mechanism to enforce state fiduciary duty law. In a derivative suit, the corporation is the functional plaintiff — that is, the real party in interest — and the allegations are that the corporation’s current or former officers and directors breached their fiduciary duties to the corporation. Any recovery in a derivative suit is returned to the corporation. In a derivative suit, despite the fact that the suit is brought in its name, the corporation’s role is limited because shareholders, whom I will call derivative plaintiffs, file these suits on behalf of corporations. The law gives shareholders this power because corporate officers and directors, who normally decide whether corporations should file lawsuits, are often implicated in the alleged wrongdoing and cannot be trusted to make unbiased decisions regarding the merits of these suits.
Jessica Erickson, Corporate Governance in the Courtroom: An Empirical Analysis, 51 Wm. & Mary L. Rev. 1749, 1756 (2010).
To the extent that there are monetary damages awarded in a shareholder derivative suit, that money comes from the individual officers and directors (¿a, the corporation’s officer and director insurance) and is deposited into the corporation’s coffers. In re Pittsburgh & L.E.R. Co. Securities and Antitrust Litig., 543 F.2d 1058, 1068 (3d Cir.1976) (“The proceeds of the action belong to the corporation and it is bound by the result of the suit.”) (quoting Ross v. Bernhard, 396 U.S. 531, 538, 90 S.Ct. 733, 738, 24 L.Ed.2d 729 (1970)). This creates an indirect benefit to the shareholders but, unlike typical class actions, shareholder derivative actions do not involve a “common fund,” or pool of money, that must be distributed to members of the class. See generally William Meade Fletcher, Derivative v. “Pure” Class Action, 12B Fletcher Cye. Corp. § 5908 (2012).
That said, shareholder derivative suits are far less likely to involve a monetary component than typical class action suits. Erickson, supra at 1804. Indeed, an empirical study of shareholder derivative actions concluded that the overwhelming majority of settlements result solely in corporate governance changes like those presented here. Id. Experts and scholars dispute the value of such changes, and I will address that issue in connection with my analysis.
In addition, the total amount of attorney’s fees payable by the plaintiff corporation, in most instances, greatly outweighs those paid by a defendant corporation in typical class action. In the typical class action suit, an unsuccessful corporate defendant pays its own attorney’s fees plus any fees due plaintiffs’ counsel under fee-shifting statutes. Where there is no fee-shifting statute, and the case settles, the defendant will often agree to pay plaintiffs’ counsel fees as part of the settlement. Conversely, for shareholder derivative suits:
First, the corporation has to hire lawyers to represent the corporation’s interests in the litigation. Second, the corporation often has to pay the legal bills of its officers and directors pursuant to indemnification agreements. Third, ... corporations often form a special litigation committee [ (“SLC”) ] to investigate the allegations in the suit. The cost of forming such a committee can dwarf the other expenses in the litigation because SLCs typically hire a law firm with no connection to the case to ensure the firm’s independence, and the law firm then commences a full-blown investigation, complete with extensive document review and interviews of dozens of people close to the alleged events. Fourth, the corporation incurs additional indirect costs when its key personnel have to divert attention from other corporate duties to assist with the litigation. These costs can be considerable, ... on average, more than six law firms [are] involved in [the] lawsuit.
Erickson, supra at 1085.
In light of the unique characteristics of shareholder derivative actions, and the potential for abuse and collusion inherent in cases that involve large attorney’s fee awards, I probe the settlement terms here carefully to examine whether the specific reforms agreed to here result in a fair settlement to the corporation. To that end, I now turn to my application of the Girsh factors.
B. Girsh Factors
Applying the Girsh factors here, I conclude that, taken together, they favor approval of the settlement.
1. Complexity, expense and likely duration of the litigation
The first factor involves a consideration of the “probable costs, in both time and money of continued litigation.” In re Cendant Corp. Litig., 264 F.3d 201, 233 (3d Cir.2001). As an initial matter, I note that shareholder derivative actions are, by their nature, “undeniably complex.” Unite Nat. Retirement Fund v. Watts, Civil Action No. 04-3603(DMC), 2005 WL 2877899 at *3 (D.N.J. Oct. 28, 2005). This is particularly true here, as J & J’s decentralized management structure necessitates delving into the practices and records of several of J & J’s 250 subsidiary corporations.
Moreover, if the Derivative Suits were to proceed, it would involve extensive discovery and trial preparation. While the parties engaged in motion practice and settlement discussions, the Court stayed discovery. Hence formal discovery has not even begun. That said, the parties did engage in informal discovery, including the production of documents relevant to corporate governance and compliance, see Joint Decl., ¶ 62. Thus, some of the discovery costs have already been incurred by the corporation. Nevertheless, given the complexity of the legal issues and that many of the allegations relate to J & J subsidiaries located in various regions of the country and world, this litigation has the potential to be both time-consuming and expensive for the parties.
In addition, expert fee expenditures are likely to increase. For example, the record reveals that the Demand-Futility Plaintiffs’ co-counsel Morris and Morris LLC has already incurred $200,700.00 in expert fees, Morris Decl., Exh. 2, and demand refused counsel Abraham, Fruchter & Twersky, LLP has incurred $21,282.75 in expert fees, Abraham Decl., Exh. 2. Although these amounts relate, in part, to the use of experts in the settlement negotiations, see Joint Decl., ¶ 64, should Plaintiffs ultimately prevail, additional testimony and reports will be required at the damages stage of litigation. This will result in further, hefty litigation costs.
Furthermore, there would be significant motion practice. Although J & J succeeded in its initial motion to dismiss against the Demand-Futility Plaintiffs, should the suit progress, Plaintiffs would file an amended complaint. Because J & J has been steadfast in its assertion that it did not engage in culpable conduct, and that its directors are protected by J & J’s exculpatory charter, it would undoubtedly file a second motion to dismiss that complaint. Then, if the Derivative Suits were to proceed beyond the pleading stage, J & J would likely file summary judgment motions against the Demand-Futility Plaintiffs as well. With regard to the Demand Refused Plaintiffs, J & J has also filed a motion to dismiss against them, which was stayed pending settlement negotiations. Finally, the post-trial motion and the appeals process would further extend the length of the litigation. Accordingly, a significant amount of money and resources would be required to pursue this litigation to a final judgment, which would ultimately delay final resolution of the suit and require J & J to incur additional attorney’s fees for its own counsel. Taking into consideration each of these likely costs, I conclude that this factor favors settlement.
2. The Reaction of Class Members
There are over 380,728 J & J shareholders, yet the Court has received only 15 objections. The substance of these objections will be addressed below, but suffice it to say here that many of the objections focus on Plaintiffs’ request for attorney’s fees as opposed to the fairness of the settlement itself. For the purpose of this factor, the few objections made to the underlying settlement from the class members as compared to the potential number of class members creates a presumption that this factor weighs in favor of settlement. In re Cendant, 264 F.3d at 235 (“The vast disparity between the number of potential class members who received notice of the Settlement and the number of objectors creates a strong presumption that this factor weighs in favor of the Settlement”).
Indeed, under Girsh, such a small number of negative responses favors approval of a class action settlement. See, e.g., Stoetzner v. U.S. Steel Corp., 897 F.2d 115, 119 (3d Cir.1990) (objections by 29 members of a class comprised of 281 “strongly favors settlement”); In re Prudential Ins. Co. of America Sales Practices Litig., 962 F.Supp. 450, 537 (D.N.J.1997)(small number of negative responses to settlement favors approval); Weiss v. Mercedes-Benz of North America, 899 F.Supp. 1297, 1301 (D.N.J.1995) (100 objections out of 30,000 class members weighs in favor of settlement).
At the settlement approval hearing, the Court further noted that none of the objections have been made by institutional investors. Objector Mark Petri argued that the Court should not draw any conclusion from the failure of institutional investors to object because “it would be economically irrational [for such an investor] to spend $50,000 on an attorney and their experts to come in and object to the settlement.” Hrg. Tr. 24:21-23. Thus, in Petri’s view, this factor should not weigh heavily in the Court’s fairness evaluation. As noted at the hearing, however, an institutional investor could simply spend $1.32 on postage to send a letter objection, just as the few individual investors did here.
That said, the Third Circuit has indicated that “the practical realities of class actions has led a number of courts to be considerably more cautious about inferring support from a small number of objectors to a sophisticated settlement.” In re General Motors Corp., 55 F.3d 768, 812 (3d Cir.1995) (citing In re Corrugated Container Antitrust Litig., 643 F.2d 195, 217-18 (5th Cir.1981)). As noted, derivative litigation is, by its nature, complex and the Derivative Suits, in particular, involve complex issues involving federal statutes and regulations. In addition, the typical investor may not possess the tools with which to value injunctive relief such as corporate governance reforms. Thus, while the small number of objectors still favors approval, accord McLennan v. LG Electronics USA, Inc., Civil Action No. 10-3604, 2012 WL 686020, *6 (D.N.J. Mar. 02, 2012) (concluding that 107 opt-outs out of 418,411 class members favored approval of class action settlement), Chakejian v. Equifax Information Services, LLC, 275 F.R.D. 201, 212 (E.D.Pa.2011) (concluding that a total of 9 opt-outs and objections out of 40,000 favored settlement), I do not place great weight upon this factor in light of the sophisticated nature of the suit and the valuation problems inherent in the injunctive relief that makes up the substance of the settlement here.
3. The Stage of Proceedings and the Amount of Discovery Completed
This factor “captures the degree of case development that class counsel have accomplished prior to settlement. Through this lens, courts can determine whether class counsel had an adequate appreciation of the merits of the case before negotiating.” In re Cendant, 264 F.3d at 235 (citations omitted). Even settlements reached at a very early stage and prior to formal discovery are appropriate where there is no evidence of collusion and the settlement represents substantial concessions by both parties. Weiss, 899 F.Supp. at 1301 (discussing General Motors, 55 F.3d at 790-92). Indeed, courts in this district have approved settlements while the case was in the pre-trial stage and formal discovery had not yet commenced. See, e.g., O'Brien v. Brain Research Labs, LLC, Civ. Action No. 12-204 (Schwartz, J.), 2012 WL 3242365 at *17 (D.N.J. Aug. 9, 2012); Watts, 2005 WL 2877899. The Third Circuit has further indicated that, when a case is settled at an early stage, this factor may strongly favor approval if the liability case against the defendant is clear. In re Cendant, 264 F.3d at 236.
As noted, formal discovery has not begun in the Derivative Suits. However, the parties have engaged in informal sharing of documents relating to J & J’s corporate governance structure. This document sharing enhanced Plaintiffs’ counsel’s appreciation of the strength of their cases. In addition, the parties have engaged in extensive motion practice regarding the Demand-Futility Plaintiffs’ complaint, which further shaped counsel’s appreciation of the merits. Accord Weber v. Govt. Employees Ins. Co., 262 F.R.D. 431, 445 (D.N.J.2009). Although J & J has filed a motion to dismiss against the Demand Refused Plaintiffs which was not adjudicated, it nonetheless informed Plaintiffs’ counsel of J & J’s potential defenses to liability. Id.
Apart from documents shared through litigation, Plaintiffs counsel also reviewed news reports, securities analyst reports, J & J public filings with the Securities and Exchange Commission (“SEC”), and court documents in related cases. In addition, counsel submitted a Freedom of Information Act request to the Food and Drug Administration, and reviewed the documents produced in response. Those documents relate to the problems at J & J subsidiary McNeil Consumer Healthcare and the January 15, 2010 FDA warning letter sent to McNeil. Joint Decl., ¶ 37. As explained in more detail in my decision on J & J’s motion to dismiss the demand futility complaint, the FDA warning letter is one of the central documents related to Plaintiffs’ breach of fiduciary duty claims against the Board.
Furthermore, Plaintiffs’ counsel consulted with experts and reviewed the Special Committee’s findings. For example, counsel in one of the demand futility actions worked with Dr. Glass in drafting their allegations relating to off-label drug marketing. Joint Deck, ¶ 21. In addition, Demand Refused Counsel engaged Dr. Robert Israel, a pharmaceutical company senior vice-president with responsibility over compliance issues, who assisted counsel in preparing their settlement demands. Id. at ¶¶ 56-57.
Based on all of Plaintiffs’ counsel’s research, the Court finds that counsel had sufficient information to make an informed decision regarding settlement. The Court recognizes that there has not been a ruling on J & J’s liability as the Court’s prior opinion dealt only with whether the Demand-Futility Plaintiffs had pled sufficient facts to justify their decision to file suit without first demanding action from the Board, and J & J has not admitted wrongdoing. Nevertheless, in light of the abundance of publically available documents that call into question J & J’s oversight practices, the informal discovery exchanged, the motion adjudicated and papers filed in the motion to dismiss the demand refused complaint, I conclude that this factor weighs in favor of approval.
4-5. Risks in Establishing Liability and Damages
The fourth and fifth factors “survey the potential risks and rewards of proceeding to litigation in order to weigh the likelihood of success against the benefits of an immediate settlement.” In re Warfarin Sodium Antitrust Litig., 391 F.3d 516, 537 (3d Cir.2004). In other words, these factors attempt “to measure the expected value of litigating the action rather than settling it at the current time.” In re Cendant, 264 F.3d at 238. Both factors strongly weigh in favor of approval in this case.
Here, Plaintiffs face significant hurdles in proving their cases. J & J succeeded in its motion to dismiss against the demand-futility plaintiffs, and no amended complaint has been filed for the Court to assess whether an amended complaint could withstand a second attack. As I suggested in granting J & J’s dismissal motion, while J & J’s alleged conduct was troubling, it was not clear that the Board members were aware of red flags and chose to ignore them. And, mere negligence is not enough to create liability. As for the Demand Refused Plaintiffs, they currently face a motion to dismiss should this suit not settle. Because that motion was stayed during settlement negotiations, the Court has not undertaken a review of the merits, however, that the motion has been filed creates the possibility that the Demand Refused Plaintiffs may not succeed on the merits if the cases do not settle. In terms of damages, it is not clear how much J & J would have likely obtained and, even if the amount was sizeable, it would likely have little monetary effect on a company of J & J’s size — with a market capitalization exceeding $190 billion.
Even if either group of Plaintiffs were successful at trial, J & J would likely appeal, which would further delay resolution of the suit and impede finality. Accordingly, given the real and extensive risks involved in Plaintiffs’ cases, these two factors weigh heavily in favor of approval of the settlement. Accord O’Brien, 2012 WL 3242365 at *18 (concluding that this factor weighs in favor of settlement where plaintiffs faced “numerous hurdles to overcome” and had yet to withstand motion practice on defendant’s defenses and/or appeal); In re Suprema Specialties, Inc. Sec. Litig., 2008 WL 906254 at *5-6 (D.N.J. Mar. 31, 2008) (approving settlement where plaintiffs would have difficulty establishing liability and damages); In re Genta Sec. Litig., 2008 WL 2229843 (D.N.J. May 28, 2008) (same).
The risk of maintaining the class action throughout trial factor is inapplicable to shareholder derivative actions and, therefore, omitted. See Watts, supra at *4.
6. Defendants’ Ability to Withstand a Greater Judgment
This factor addresses whether Defendants “could withstand a [monetary] judgment for an amount significantly greater than the [proposed] Settlement.” In re Cendant, 264 F.3d at 240. Here, there is the possibility that the Derivative Suits would have succeeded at trial and a monetary judgment would have been imposed against the individual director and officer defendants. If that were to occur, the individual defendants would likely tender the claims to their insurance carriers. But even assuming there are sufficient funds to pay a greater judgment, the Third Circuit “has found that a defendant’s ability to pay a larger settlement sum is not particularly damaging to the settlement agreement’s fairness as long as the other factors favor settlement.” O’Brien, supra at *19 (citing In re Prudential Ins. Co. America Sales Practice Litig. Agent Actions, 148 F.3d 283, 322 (3d Cir.1998)).
7-8. The Range of Reasonableness of the Settlement in Light of the Best Possible Recovery and in Light of Litigation Risks
The last two factors evaluate whether the settlement represents a fair and “good value for a weak case or a poor value for a strong case.” In re Warfarin, 391 F.3d at 538. “In conducting this evaluation, it is recognized that ‘settlement represents a compromise in which the highest hopes for recovery are yielded in exchange for certainty and resolution and [courts should] guard against demanding to[o] large a settlement based on the court’s view of the merits of the litigation.” In re Safety Components, Inc. Sec. Litig., 166 F.Supp.2d 72, 92 (D.N.J.2001); In re AT & T Corp. Sec. Litig., 455 F.3d 160, 170 (3d Cir.2006) (finding settlement was an “excellent” result in light of the risk of establishing liability and damages despite the fact that settlement possibly represented only 4% of the total damages claimed).
Because Plaintiffs have a real risk of proving their claims, as discussed above, these two factors also weigh in favor of approving settlement for the reasons described above. Moreover, even if Plaintiffs ultimately obtained similar corporate governance reforms through a successful trial and appeal, settling at this juncture benefits J & J by ensuring that the reforms are implemented more expeditiously, and by eliminating future litigation costs. See Watts, supra at *4 (“The settlement provides immediate and substantial benefits for all parties and represents a better option than little or no recovery at all.”); id. (“The best possible recovery, while arguably more than the settlement, is tempered by the risks of further litigation.”) Therefore, these factors weigh in favor of approving the Settlement.
Having weighed all the Girsh factors, the Court finds that these factors strongly suggest that the proposed settlement is fair, reasonable and adequate. This matter is complex and would require an extensive trial. Should the matter reach trial, there is “no guarantee whom the jury would believe,” In re Cendant, 264 F.3d at 239, which means that Plaintiffs run the risk of not prevailing on their claims. Only a few shareholders object to the settlement, and only one objector voiced substantive objections to the settlement itself, with the majority of the objections being focused on the attorney’s fee amount. While the Derivative Suits are still in the early stages of litigation, counsel’s research, the numerous publically-available documents, and J & J’s filing of its motions to dismiss, facilitated counsel’s appreciation of the merits of their cases. Finally, not approving the settlement would lead J & J to incur substantial attorney’s fees and expenses for the remainder of litigation before this Court and on appeal.
C. Additional Factors
As noted, courts are “free to consider other relevant circumstances and facts involved in [the] settlement” in addition to the Girsh factors. Plymouth County, 2012 WL 664827, at *2. Here, I find compelling that Plaintiffs’ counsel was able to achieve significant injunctive relief that is tailored to remedy the corporate governance failings inherent in J & J’s decentralized management structure. Below, in my attorney’s fee analysis, I explain in more detail the significance of the corporate governance reforms incorporated into the settlement here. Moreover, while some may argue that monetary relief would amount to a greater recovery, the Supreme Court and Court of Appeals have made clear that injunctive relief, on its own, may constitute a significant benefit for the corporation. See Mills v. Electric Auto-Lite Co., 396 U.S. 375, 391-95, 90 S.Ct. 616, 24 L.Ed.2d 593 (1970); Shlensky v. Dorsey, 574 F.2d 131, 149 (3d Cir.1978).
D. Adequacy of Notice
Several objectors have complained about the adequacy of the notice. According to the Third Circuit law, “[n]onparty shareholders must be given notice of a proposed settlement of a shareholder’s derivative action.” Bolger, 2 F.3d at 1317 (citing Maher v. Zapata Corp., 714 F.2d 436, 450 (5th Cir.1983)). Federal Rule of Civil Procedure 23.1 instructs district judges to direct the manner in which notice should be given. Fed.R.Civ.P. 23.1(c). The notice “must be sufficiently informative and give sufficient opportunity for response,” in order to allay any due process concerns. Id. (quoting Kyriazi v. Western Elec. Co., 647 F.2d 388, 395 (3d Cir.1981)).
Here, I directed in my Preliminary Approval Order that J & J provide notice to all shareholders who were of record as of the date of execution of the parties’ Stipulation concerning settlement. Consistent with my order, J & J provided notice to those shareholders via’ first class mail within five (5) business days following the entry of the Order. In addition, J & J published notices in the Wall Street Journal, USA Today, and over PR Newswire. Moreover, J & J posted copies of the Stipulation and proposed settlement agreement on its website.
While many shareholders were notified of the settlement through these methods, a few shareholders complained to the Court that they did not receive notice until after the deadline for objections had passed. In response to these complaints, the Court held a telephone conference with the parties to discuss the adequacy of notice. It appeared to the Court, after discussing this issue with counsel, that the late-noticed shareholders were individual shareholders whose shares were held in a street name, most likely that of a brokerage house. Indeed, counsel also informed the Court that Fidelity Investments, rather than forwarding notices to the shareholders for whom it held stock in street name, requested that J & J mail notices directly to those shareholders.
Cases addressing the adequacy of notice under these circumstances have held that notice to a nominee is sufficient and, if the nominee “fails to forward the notice to the beneficial owner within the time allotted, so that the time to ... object [ ] passes, the beneficial owner is still bound.” Joseph M. McLaughlin, 1 McLaughlin on Class Actions § 5:80 (8th ed.) (2011); In re Intel Corp. Derivative Litigation, Civil Action No. 09-867, 2010 WL 2955178, at *2 (D.Del. July 22, 2010) (“With respect to lack of notice, courts have recognized that untimely notice is an attendant risk of owning stock in ‘street name,’ and that the ultimate question with respect to notice is not whether some individual shareholders got adequate notice, but whether the class as a whole had notice adequate to flush out whatever objections might reasonably be raised to the settlement.”) (citations omitted). Nevertheless, out of an abundance of caution, I extended the deadline for objections and directed J & J to provide notice of the extended deadline to those shareholders who received late notice. Accordingly, I conclude that the notice here was reasonable and adequate based on the present circumstances.
E. Attorney’s Fees and Costs
Having concluded that the Girsh factors favor approval of the settlement, and that notice was adequate, I now turn to whether the settlement confers a substantial benefit on the corporation. If I conclude that the settlement does not confer a substantial benefit, Plaintiffs’ counsel may not be awarded attorney’s fees. See Shlensky, 574 F.2d at 149.
While, under the “ ‘American’ rule ordinarily applied in our courts, a prevailing litigant is not entitled to recover attorneys’ fees from a losing party absent statutory authority ... [t]he plaintiffs in a shareholders’ derivative action may ... recover their expenses, including attorneys’ fees, from the corporation on whose behalf their action is taken if the corporation derives a benefit, which may be monetary or non-monetary, from their successful prosecution or settlement of the case.” Id. In making this assessment, courts should consider case law addressing fee awards in class action suits alongside derivative suit case law. See id. at 150.
To determine whether a settlement confers a substantial benefit, courts in this circuit consider the following factors in class action suits:
(1) the size of the fund created and the number of persons benefitted; (2) the presence or absence of substantial objections by members of the class to the settlement terms and/or fees requested by counsel; (3) the skill and efficiency of the attorneys involved; (4) the complexity and duration of the litigation; (5) the risk of nonpayment; (6) the amount of time devoted to the case by plaintiffs’ counsel; and (7) the awards in similar cases.
In re AT & T Corp., 455 F.3d 160, 165 (3d Cir.2006). In addition, courts may consider “(1) the value of benefits accruing to class members attributable to the efforts of class counsel as opposed to the efforts of other groups, such as government agencies conducting investigations; (2) the percentage fee that would have been negotiated had the case been subject to a private contingent fee agreement at the time counsel was retained; and (3) any ‘innovative’ terms of settlement.” Id. The first factor — the size of the fund created and the number of persons benefitted — is not relevant where, as here, the settlement is comprised of only injunctive relief. Also, the percentage fee that would have been negotiated had the case been subject to a private contingent fee agreement at the time counsel was retained is not relevant here where the injunc