Full opinion text
RULING ****:|!***:|:*****************************************:|:************************:|:****** TABLE OF CONTENTS I. Overview.................................................................1119 II. Background..............................................................1119 A. Facts................................................................1119 B. Procedure............................................................1120 C. Proof of Claim Forms .................................................1121 D. Negotiations and Settlements...........................................1122 III. Law — Approval of Proposed Partial Settlements ..............................1124 IV. Analysis .................................................................1125 A. Preliminary Approval..................................................1125 B. Notice...............................................................1125 C. Fairness, Reasonableness, and Adequacy.................................1126 D. Reed factors..........................................................1126 1) Existence of Fraud or Collusion.....................................1126 2) Complexity, Expense and Duration of the Case........................1127 3) Stage of the Proceedings...........................................1127 4) Probability of Plaintiffs’ Success on the Merits.........................1127 5) Range of Possible Recovery........................................1128 6) Opinions of Class Counsel, Class Representatives, and Absent Class Members.........................................................1129 E. Objections to the Proposed Settlements..................................1129 F. Conclusion — Phase I ..................................................1129 V. Partial Disbursement — Phase II ............................................1129 A. Overview ............................................................1129 B. Reserves.............................................................1131 1. Indemnity and Liability Reserves ...................................1131 2. Litigation, Class Administration, and Class Distribution Reserves.......1131 3. Attorneys’ Fees...................................................1131 a) Methodology..................................................1132 i) Percentage of Fund.......................................1132 ii) Lodestar-risk Multiplier...................................1133 in) Fifth Circuit Methodology..................................1134 b) Analysis — methodology.........................................1135 c) Application of Johnson Factors..................................1136 i) Time and Labor Required..................................1136 ii) Novelty and Difficulty of the Questions Involved..............1137 iii) Skill Required to Perform the Legal Services Properly.........1137 iv) Preclusion of Other Employment............................1137 v) Customary Fee...........................................1138 vi) Whether Fee is Fixed or Contingent.........................1138 vii) Time Limitations Imposed by the Client.....................1138 viii) Amount Involved and the Results Obtained...................1138 ix) Experience, Reputation and Ability of the Attorneys Involved...............................................1138 x) Undesirability of the Case..................................1138 xi) Nature and Length of the Professional Relationship with the Client..............................................1139 xii) Awards in Similar Cases...................................1139 C. Objections to Phase II.................................................1141 VI. Conclusion...............................................................1142 HAIK, District Judge. I. Overview A monumental milestone in In re Combustion is now before the Court. Plaintiffs’ Steering Committee (PSC) and some 450 defendants, third party defendants, and insurers have jointly submitted to the Court four preliminary settlement agreements for approval as proposed. The result for these settling parties will be dismissal with prejudice from the tort portion of this ease. In addition, the PSC and the Special Master are presenting to the Court for approval the initial steps toward partial disbursement to the Class of settlement funds. The target date for disbursement is this fall. Cabinets of files, rooms of cabinets, offices, teams, dedicated fax machines, liaison counsel, two law clerks, 11 years of litigation, ranks of Combustion widows and widowers describe the efforts dedicated to this case. In the opinion of this Court, echoed at three annual Judges Conferences on Multi-district Litigation, this case is unique in the category of class actions. For example, it is unique in the sheer numbers of defendants — 80 primary, hundreds of third party, and hundreds of the insurers — and unique in that the law of Louisiana allows the tort victim to sue the tortfeasor’s insurer directly. In this case, the PSC litigated tort liability against the primary and third party defendants, and tort liability and coverage against the insurers. Meanwhile, the primary defendants filed claims for contribution and cost recovery under CERCLA against the third party defendants, and tort and CERCLA indemnity against their insurers. Approval of the settlements currently before the Court will leave only one primary tort defendant. Insurance coverage issues remain as well. But with regard to the Class, after the Court’s decision regarding the maximum reserves currently being considered, the Special Master is directed to proceed with his plan to disburse funds to the Claimants in the fall of this year. For the reasons articulated below the court approves the four preliminary settlement agreements as proposed and approves the six reserves as proposed by the Special Master, with the Stipulations listed below. II. Background A. Facts The Dubose operation — Combustion, Inc. site was a waste-oil recycling, reclamation facility located in Livingston Parish, Louisiana. It operated from 1964 — 1982 and consisted of a process area containing boiler equipment, storage and process tanks, and a 7.5 acre pond area. In the early 1960’s, Earl Dubose built a house and trucking yard and began the operation of what he termed an oil recycling and fuel oil resale business on a piece of land behind his home. Residential properties surrounded the waste site. Initially, Dubose collected waste oil from service stations, dealerships, and garages and processed the oil in pits he dug, lined naturally with clay but no additional synthetic material. In 1973, he expanded his operations by picking up used oil and other materials from industrial sources. Early processing consisted of allowing the waste oil to separate naturally from other waste materials simply by the force of gravity. Later Dubose found that heating the waste oil accelerated the separation process, and adding chemicals such as toluene increased the flammability and resale value of the recycled product. Dubose stored and sold the final product as fuel oil. However, during the Dubose years, stench permeated the area, fires erupted at the facility, severe rains caused extensive flooding of the ponds into bordering canals and property, and several large oil spills occurred. In 1977, Dubose sold the business to H. Arthur Gammons. Mr. Gammons incorporated the business under the name “Combustion, Inc.” and continued a similar but slightly more sophisticated operation until 1982 when he closed Combustion, Inc. because of financial and regulatory problems. In 1985, the Louisiana Department of Environmental Quality (DEQ) became involved in this matter, as did the United States Environmental Protection Agency (EPA). The Combustion, Inc. site was listed on the National Priorities List as a Superfimd site. The DEQ issued letters to “potentially responsible parties” (PRPs) it determined had disposed of used oil or chemicals at the site. In response to action by the DEQ, a group of approximately 23 PRPs formed a committee to clean up the site. To date remediation expenses exceed $17 million and could escalate tremendously if current testing reveals groundwater contamination. B. Procedure More than 10,000 individuals have completed Proof of Claim forms asserting both personal injury and property damage as a result of the operation of the waste site. In addition to the claims against the site owner-operators, Plaintiffs allege culpability on the part of approximately 800 “generator” — and “transporter” — type defendants who caused or contributed or delivered waste oil or toxic chemicals to the site over the twenty-year life of the operation. In addition, Plaintiffs claim injury and damages from exposure to these toxins as a result of fires and floods at the site through 1994, when the site cleanup procedures were substantially completed. The allegations of harm resulting from exposure to toxic chemicals during recycling and during fires, floods and spills range from fear, fright and anxiety to wrongful death claims. Property damage claims run the gamut from contamination to diminution in value because of proximity to the site. Specifically, this matter was initiated in 1986 in state court in Livingston Parish, Louisiana. Seventeen separate suits asserting six causes of action against approximately 80 defendants were filed in the Twenty-first Judicial District Court. One of these suits was filed on behalf of a class of persons asserting claims related to the site. The complaints allege that the defendants are absolutely liable under La. Civ. C. art. 667, art. 2315, and art. 2317 for engaging in ultrahazardous activities consisting of disposing of and storing dangerous, toxic chemicals at the site and contributing to the creation of an ultrahazardous instrumentality — the site itself. Plaintiffs allege that the nature of the hazardous substances generated by the defendants was such that damage to personal property within a certain proximity of the site could not be avoided even in the exercise of due care. Plaintiffs allege strict liability under La. Civ. C. art. 2317 in the exercise of each defendant’s unreasonable activity in causing or contributing to Plaintiffs’ exposure to hazardous materials. To the extent that a defendant attempted to transfer garde of hazardous substances without ascertaining that the substances would be disposed of in a reasonably safe manner, that defendant is subject to strict liability for the damages caused by such activity. Plaintiffs claim this is true regardless of whether the defendant knew of the nature or the dangerous substances or knew of the method of disposal. The complaint also alleges that defendants who generated the hazardous wastes are strictly liable under La. Civ. C. art. 2315 as interpreted with regard to Louisiana product liability jurisprudence. Plaintiffs contend defendants placed unreasonably dangerous products that caused harm into the stream of commerce. This cause of action arose prior to the adoption of the Louisiana Product Liability Act. Plaintiffs allege that defendants are strictly liable for tort damages under the Louisiana Environmental Quality Act (“LEQA”), LSA-R.S. 30:2026, pertaining to the disposition of hazardous substances. This Act prescribes the course of conduct to be followed in Louisiana for the handling and disposition of hazardous substances. Plaintiffs assert claims under La. Civ. C. art. 2315 that the defendants negligently engaged in activities in which there was an unreasonable risk of harm to plaintiffs, of which defendants knew or should have known. Plaintiffs further contend that the defendants violated various duties imposed upon them by law. Finally, to the extent that any defendant’s conduct subsequent to January 1, 1985 constituted reckless disregard for public safety in the transportation, storage, or handling of hazardous or toxic substances, liability may be imposed under Louisiana’s punitive damages statute, La. Civ. C. art. 2315.3. Pursuant to an order of the Louisiana court, plaintiffs in all seventeen suits combined their allegations into one Master Amending and Supplemental Petition asserting above claims on behalf of the individuals and the Class of persons in Livingston Parish. The class was certified by the state court and affirmed on appeal with the exception of the class definition, which was approved on the second appeal as follows: All persons or entities who or which own real or personal property and/or live and/or operate places of business and/or work and/or attend school in Livingston Parish, Louisiana, and/or who have been so situated during the time since the early 1960’s, and who or which claim to have sustained damages as a result of the discharge, release or leakage of toxic substances from the premises now or formerly know as Combustion, Inc., and/or Earl G. Dubose, located at Dubois Lane and Milton Road and Burgess Road in Livingston Parish, Louisiana. Shortly after class certification, defendant McDermott, Inc. filed a third party demand against American Cyanamid in each of the seventeen pending suits for contribution or indemnification for any amount which McDermott might be held liable to plaintiffs and for the cost recovery action under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), 42 U.S.C. § 9601, et seq. The matter was removed for the third time to the United States District Court for the Middle District Court of Louisiana on April 13, 1993, pursuant to 28 U.S.C. § 1441(c). The basis for removal was the district court’s exclusive jurisdiction over all claims brought under CERCLA. In a flurry of motions, McDermott filed third party claims against approximately two hundred potential “generators” and “transporters” and brought claims against the United States Government. In addition, McDermott filed suits in United States District Courts in Alabama, Florida and Mississippi under CERCLA with supplemental state tort claims. McDermott then invoked a petition for Multi-district certification on September 22,1993, permitting all suits to be consolidated for purposes of pre-trial proceedings pursuant to 28 U.S.C. § 1407. In July of 1994, and by agreement of all parties, Combustion was transferred to the Western District of Louisiana under Judge Richard T. Haik, Sr., as both judges in the Middle District of Louisiana had recused themselves. In May 1995, this Court adopted the state court’s class certification, and in -July 1995 the district court denied Plaintiffs’ motion to remand. By Memorandum Order of July 5, 1995, this Court deemed Plaintiffs’ claims asserted against all third party defendants. Further, in 1995 and 1996, the Court allowed Plaintiffs to assert a direct action pursuant to La. R.S. 22:655 et seq. against all insurers of the main and third party defendants and allowed all defendants and third party defendants to file cross-claims against their insurers. The Court’s Case Management and Scheduling Orders parceled this litigation into four phases. Phase I was the CERCLA trial. Phase II consisted of dispositive motions primarily on insurance contract defenses against the direct action Plaintiffs and the insureds, the defendants and third party defendants. Phase II was argued throughout the fall of 1996 and into 1997. Phase III is the tort trial, scheduled for September 29, 1997, and Phase TV will wrap up outstanding insurance contract disputes based on the factual determinations made in Phase III. C. Proof of Claim Forms On May 26,1994, pursuant to Fed. R. Civ. Pro. 23(d), this Court established a requirement that any class member who wished to assert a claim must complete a Proof of Claim form. The Court then ordered the PSC to give notice to all class members that the forms must be completed by December 31, 1994, later extended to April 11, 1995. More than 10,000 claim forms were filed timely. Further, any class member who failed to complete a proof of claim form prior to the deadline was allowed the opportunity to contact the Court in writing prior to the first fairness hearing on September 26, 1995 and to show good cause why the party had not complied with the Court ordered deadline. D. Negotiations and Settlements In August 1994, this Court established committees of plaintiffs’, defendant’s, and third party defendants’ counsel for the purposes of settlement negotiations. After eight months of unsuccessful talks regarding a global settlement, the Court ordered the meetings to cease. In April 1995, defense counsel asked the Court to appoint a mediator to aid in partial settlement negotiations. Mr. Patrick Juneau was appointed Special Master on April 28,1995. The Special Master conducted negotiations through 1996. As a result of those mediations and of independent negotiations among counsel for various entities, seven partial settlement agreements have been presented to this Court. All agreements have been given preliminary approval by the Court as proposed, and the Court has held fairness hearings on the first two agreements, on September 26, 1994 and February 29, 1995, issuing Written Reasons and Final Judgments on February 7,1996 and May 9,1996 respectively- In addition, the Court instructed the PSC to employ professional accountants to oversee the financial obligations of the parties to the first settlement agreement, the Preliminary Settlement Agreement, and for each successive settlement agreement. The accountants manage and supervise the Settlement Fund, including duties such as receipts and deposits, tax accounting, disbursements, review of PSC cost submissions, and advice to the Special Master in allocation protocol. The accounting firms of Bourgeois Bennett and Postlethwaite & Netterville, APAC, fulfill these duties and are heretofore referred to as the court-appointed-disbursing-agents (CADA). See also Transcript April 18, 1997, pp. 187-88. The four settlement agreements currently before the Court were presented to the Court for preliminary approval on August 26, 1996, September 18, 1996, January 8, 1997, and February 24,1997 respectively. The list of compromising parties in each agreement is attached. See Exhibit 1. All settlement dollars were deposited in Regions Bank of Louisiana and First National Bank of Commerce, Trustee A and Trustee B, pursuant to the conditions of the Escrow and Trust Agreement made effective July 28, 1995 as part of the original Preliminary Settlement Agreement. The Escrow and Trust Agreement is one between the Trustees on the one hand and the PSC and Compromising Parties on the other. It has been “extended” to include each new set of compromising parties and each new settlement amount, including the agreements currently before the Court. The Second, Third, and Fourth Supplemental Preliminary Settlement Agreements, document numbers 5826, 6074, 6833, track the two previously approved agreements. See Written Reasons for Approval, document #4160 at pp. 11-15 and #4965 at pp. 11-18. For a sum certain, commensurate with the volume and content of the waste sent to the site as alleged by the Plaintiffs, each settling defendant was dismissed from the litigation with prejudice as to all tort claims asserted or that may be asserted by the Class. Where noted, the PSC also was given an assignment of rights against that defendant’s insurers to pursue whatever coverage that may have existed during the relevant time period. In addition, the PSC reserved all rights to pursue direct action claims against the insurers. Claims brought or claims that could be brought pursuant to CERCLA were also expressly preserved. The Fifth Supplemental Preliminary Settlement Agreement, document #7b 7063, contains an in globo subscription agreement on behalf of almost 100 parties, eight are main and third party defendants and the remaining are insurers. The 5th SPSA also contains four additional, individual subscription agreements. Terms of the in globo agreement are similar to the preceding agreements but also include the release of all tort and tort indemnity claims brought or that could have been brought by and between an Compromising Parties who are parties to the in globo agreement. Specifically, the Second Supplement Preliminary Settlement Agreement, document #5826, represents a compromise between the Plaintiffs and eleven defendants and several of their insurers, sixty-five parties altogether, for the sum of $1,747,000. See Exhibit 1. Each settlement is as follows: Bagwell Coating, Inc. and named insurers for $100,000 plus an assignment of all rights for insurance against unnamed insurers; Classic Car Imports for $1,000 plus an assignment of all rights for insurance; Deere & Company and named insurer for $75,000; Delta Commodities, Inc., Terminal (DC) Corp. and insurers named or otherwise for $825,000; Doran’s Car Care for $1,000; Pirelli Armstrong Tire Corporation and The Armstrong Rubber Company and named insurers for $100,000; Southern Equipment, Inc. and named insurers for $120,000; Southern Steamship Agency, Inc. and Ralph Walsh, Inc. for $50,000 plus an assignment of all rights for insurance; Terrebone Motor Company, Inc. and named insurers for $100,000; Unisys Corp. and named insurer for $275,000; Williams-McWilliams Company, Inc. for $100,000 and an assignment of all rights for insurance. The Third Supplemental Preliminary Settlement Agreement, document # 6074, was executed between the PSC and more than 200 compromising parties. This large group consists of ten main and third party defendants and their respective insurers solely in their capacities as insurers of the identified insured. See Exhibit 1. Compromising Parties contributed a total of $12,189,500 to the escrow account under similar terms as set out in the SSPSA. The subscription agreements are as follows: Exxon Corporation for $2,000,000; Shell entities for $2,000,000; CIBA-GEIGY Corp. and all insurers for %,500,000; Petrochemical Maintenance, Inc. and named insurers for $120,000; Western Auto Supply Company and the named insurers for $90,000; P & W Industries, Inc. and named insurers for $787,500; MagneTek and Universal Manufacturing solely for $275,000; Sears, Roebuck & Company and named insurers for $550,000; Affiliated FM Insurance Co. as insurer of Sears for $6,000; ERIC Reinsurance as insurer of Sears for $6,000; Sermatech International and named insurers for $175,000; Malone Service Company and named insurers for $250,000; Highland Insurance Company and other named insurers on an assignment of insurance by Boyce Machinery Corporation for $225,000; Zurich Insurance Co. as insurer of Brouillette’s Lift Service, Inc. for $85,000; named insurers of Prairie Construction Company, Inc., James Corporation of Opelousas, and Central Manufacturing on an assignment of insurance for $65,000; The Home Insurance Company as insurer of Canal Refining on an assignment of insurance for $50,000; The Home Insurance Company as insurer of Reichhold Chemicals on an assignment of insurance for $5,000. The Fourth Supplemental Preliminary Settlement Agreement, document #7b 6833, represents compromise between the PSC on one hand and 48 parties on the other, grouped together in nine subscription agreements. See Exhibit 1. The PSC deposited $4,195,-000 into the Escrow account according to the following provisions: PMAG Products, Inc, its insurer, and insurers of K-Way Equipment Company for a net amount of $175,000 with reservation of rights by the PSC against American Insurance Company as insurer of K-Way; Entergy Louisiana, Inc. and named insurers for $2,375,000; United States Postal Service for $75,000; United States Fidelity and Guaranty Insurance solely as insurer of named insureds for $1,205,000; Meason Operating Company, Inc for $85,000; Carolina Casualty Insurance as insurer of Younger Brothers, Inc. for $5,000; Associated Aviation Underwriters as insurer of Louisiana Aircraft on an assignment for $175,000; named insurers of Paul Fournet Air Service, Inc. on an assignment for $100,000. The Fifth Supplemental Preliminary Settlement Agreement, document #7b 7063, in globo subscription agreement represents the compromise between the PSC and almost 100 parties who have agreed to the settlement of all related claims in return for the payment of $20,500,000. This amount includes $6,000,-000 plus interest paid by the Insurers of Avondale Industries in full satisfaction of a Guaranty given to the PSC in the Preliminary Settlement Agreement. See Exhibit 1. The remaining $14,500,000 accounting remains confidential as part of the agreement and releases the compromising parties from all current and future claims of liability made or that could be brought by the PSC or by any other compromising party to the in globo agreement. Thus, defendants Evans Cooperage, Port Allen Marine Services, Inc., and Iberville Motors are settling their controversies with the PSC and contract disputes with each party’s particular set of insurers. The Plaintiffs reserve all rights against the remaining, non-settling defendants and their “related parties” who may include insurance companies who are parties to this agreement. However, the PSC agrees not to proceed in any manner against any insurer who is also a party to the 5th SPSA. Arthur Gammons and his family waive all rights against parties to the 5thSPSA but without prejudice to the rights of the Gammons family to participate as members of the Class. The four individual subscription agreements are Dirt Inc., Lamar Harrison for $20,000; Younger Brothers and named insurers for $450,000, and Younger Brothers waives it rights for indemnification from the named insurers; The Home Insurance Company as insurer of Combustion, Inc. and Arthur Gammons for $500,000; Louisiana Insurance Guaranty Association as guarantor of an insolvent insurer of Combustion, Inc. and Arthur Gammons for $250,000, out of which PSC will resolve claims against LIGA by CERCHA Plaintiffs. III. Law—Approval of Proposed Partial Settlements ? 23 of the Federal Rules of Civil Procedure requires court approval of any settlement entered into on behalf of a certified class. “A class action shall not be dismissed or compromised without the approval of the court, and notice of the proposed dismissal or compromise shall be given to all members of the class in such manner as the court directs.” Fed.R.Civ.Pro. 23(e). In deciding whether there is good cause to issue notice to the class and to proceed with a fairness hearing, the Court must determine that the proposed settlement appears to be the product of serious, informed, non-collusive negotiations, has no obvious deficiencies, does not improperly grant preferential treatment to class representatives or segments of the class, and falls within the range of possible [judicial] approval. In re Shell Oil Refinery, 155 F.R.D. 552, 554 (E.D.La.1993)(and authorities cited therein). The cardinal rule that a court must follow when considering final approval of a proposed class settlement is to ensure that the proposed settlement is “fair, reasonable, and adequate.” In re Corrugated Container Antitrust Litigation, 643 F.2d 195, 207 (5th Cir.1981), quoting Cotton v. Hinton, 559 F.2d 1326, 1330 (5th Cir.1977). More particularly, the Fifth Circuit has described the Court’s duty as ensuring] that the settlement is in the interest of the class, does not unfairly impinge on the rights and interests of dissenters, and does not merely mantle oppression. Reed v. General Motors Corporation, 703 F.2d 170 (5th Cir.1983), quoting Pettway v. American Cast Iron Pipe Company, 576 F.2d 1157, 1214 (5th Cir.1978). In determining whether the settlement meets this goal, a court must examine the following: (1) the existence of fraud or collusion behind the settlement; (2) the complexity, expense, and likely duration of the litigation; (3) the stage of the proceedings and the amount of discovery completed; (4) the probability of plaintiffs’ success on the merits; (5) the range of possible recovery; (6) the opinions of the class counsel, class representatives, and absent class members. Reed v. General Motors Corp., 703 F.2d at 172. In the evaluation, a district court must “undertake an analysis of the facts and the law relevant to the proposed compromise and must support its conclusions by memorandum.” In re Corrugated, 643 F.2d at 212, quoting Cotton v. Hinton, 559 F.2d at 1330 (internal quotations omitted). A mere boilerplate approval phrased in appropriate language but unsupported by evaluation of the facts or analysis of the law will not suffice. In re Corrugated, 643 F.2d at 212, citing Protective Committee v. Anderson, 390 U.S. 414, 434, 88 S.Ct. 1157, 1168, 20 L.Ed.2d 1 (1968). IV. Analysis A. Preliminary Approval In the case at bar, preliminary approval was given from the bench to each of the four proposed supplemental preliminary settlement agreements and in written orders that followed. See Transcripts of the four hearings, Document numbers k9S3, 5835, 6789, and 700k, and Orders granting Preliminary Approval to each agreement, Document numbers 5826, 607k, 6833, and 7063. In support of preliminary approval, the Special Master and counsel for the settling parties testified at each hearing that the negotiations were arms-length and that the compromise represented the best efforts of all involved. The Court recognized that the agreements were the product of rigorous efforts on behalf roughly 450 settling parties and of endless negotiations on the part of liaison counsel and the Special Master, culminating in the Herculean effort to consummate the in globo settlement between PSC and the direct action insurers. Without question good cause was shown to issue notice to the Class and to proceed with a fairness hearing. While this group of settlement agreements represents another milestone toward resolution of this marathon civil action, the task that remains will certainly require a formidable effort by the non-settling parties. The tort trial in September 1997 is projected to last ten weeks, and significant insurance coverage disputes are unresolved and may remain so until trial scheduled in early 1998. It is for this reason that this Court has decided to abandon its initial position to withhold distribution of funds until the resolution of litigation in all respects. Instead a partial distribution of funds to the Class at this time is appropriate. This particular fairness hearing represents an opportunity not only to examine the fruits of one and one-half years of negotiations, but also the time to start the process through which the Class may begin to reap the benefits of this decade-long brawl and compromise among the most skilled counsel in the country. After eleven years it is also time to focus on paying the legal bills, ending this saga, and moving ahead with life. For good cause, then, this Court ordered notice of a fairness hearing to be disseminated to the Class at which the Court would consider giving formal approval to the four supplemental preliminary settlement agreements and begin the disbursement process. B. Notice The Motion by Plaintiffs for Implementation of Partial Distribution Process asked that the Court schedule a fairness hearing to approve the Second, Third, Fourth and Fifth Supplemental Preliminary Settlement Agreements and to approve recommended maximum-cap reserves to be budgeted from the Settlement Fund. The purpose of earmarking reserves is to determine a dollar figure, the “Claimants’ Fund,” for disbursement to the Class. The Motion, document # 7072, was signed and filed into the record on March 7, 1996. As a result, the Court ordered a fairness hearing to be held April 18,1997, pursuant to Fed.R.Civ.Pro. 23(e), and directed that notice of the hearing be disseminated to all Class members who filed timely proofs of claim. Next, the Court ordered Special Master Juneau to submit his report and recommendations as to the nature and amount of any and all maximum-cap reserves. The Court ordered the PSC to include the Special Master’s recommendations in the notice to the Class. Notice to the Class was sent out March 10, 1997 and included Important Notice of Hearing, Order for Implementation of Partial Distribution Process, and Newsletter Combustion, Inc. Litigation. See Exhibit 2. Salient points of the Important Notice of Hearing include: 1) time, date, place of the hearing — 9:30 a.m. April 18, 1997 at the Federal Courthouse in Baton Rouge, Louisiana; 2) the twofold purpose: to consider for final approval the Second, Third, Fourth, and Fifth Supplemental Preliminary Settlement Agreements, available for review by any Class member, and to begin the process for partial disbursement; 3) the amount of the proposed settlements, $32,451,150, and if approved, the total amount of the Settlement Fund inclusive of the settlements under consideration, $127,-396,000; 4) the recommendations of the Special Master of the reserves to be budgeted from the Settlement Fund: a) 6% for Litigation costs; b) 6% for Class administrative costs; c) 36% Attorney’s fees recoverable by the Plaintiffs’ Steering Committee and independent attorneys of record who represent Class members; d) $500,000 plus accrued and future interest on the Settlement Fund for Class distribution costs and taxes; e) $2,000,000 Indemnity Fund in favor of the compromising parties approved in the first settlement agreement and held for a period of 13 months after the conclusion of the litigation in all respects, after which it will be disbursed at the Court’s discretion for the benefit of the Class; and f) $1,000,000 PSC liability fund for protection of all claims against the PSC for a period of 13 months after the conclusion of the litigation in all respects after which it shall be disbursed at the Court’s discretion for the benefit of the Class. The notice also provided that the Court would incorporate into the approval of the settlements and reserves a provision that upon recommendation of CADA, the Court may order the intra reserve transfer of funds among certain of the reserves and may order payment of funds from the six reserves, where appropriate, without further notice to the Class. The movement of funds specifically would not adversely affect the Claimants’ Fund and, if at all, only increase the amount of funds available for disbursement. The notice further provided that upon final approval of the four remaining settlement agreements and proposed reserves and after the disposition of any appeals, the Court will order the Special Master to prepare and submit to the Court for preliminary approval a plan of distribution of the Claimants’ Fund. After appropriate notice to each member of the Class, the proposed plan will be presented to the Class for a hearing on August 15, 1997. Finally, the notice provided a procedure through which any Class member could review and object to any settlement agreement or any recommendation of the Special Master. In this regard, as discussed, infra, the Court offered to anyone in attendance at the hearing the opportunity to question every witness during every step of the hearing. C. Fairness, Reasonableness, and Adequacy In support of the fairness, reasonableness, and adequacy of the proposed settlements, the PSC offered into evidence all preliminary settlement agreements to date and all documents generated in connection with the Second, Third, Fourth, and Fifth Supplemental Preliminary Settlement Agreements. Included in this submission was the notice to the Class, affidavits by PSC members and Class representatives, the Clerk of Court’s official attorneys’ list and docket sheet, listing 4,092 discovery and deposition documents, approximately 6,600 pleadings and 1600 motions filed in federal court, 473 attorneys of record and 60 attorneys registered pro hoc vice representing about 2335 party-defendants. This Court has carefully reviewed the submissions in light of the factors suggested in Reed v. General Motors Corp., supra, 703 F.2d at 172, and bases the following findings on that review as well as the full record and this Court’s knowledge of the case. D. Reed factors 1) Existence of Fraud or Collusion There is nothing before the Court to indicate that fraud or collusion is involved in any way in the confection of the settlement agreements. The Court has closely monitored the negotiations and is of the opinion that all counsel have tenaciously and vigorously represented their clients’ interests throughout this litigation. Liaison Counsel for the Plaintiffs and for the Insurers both testified that the negotiations were arms-length, and without collusion. Transcript Ap. 18 hearing, pp. 30:20, 43:12, 54:12. Further, testimony was presented that the matter of attorneys’ fees was not negotiated in conjunction with the settlement agreements but was left for separate determination by the Court. Transcript Ap. 18 hearing, pp. 35:1-12; see In re Ford Motor Co. Bronco II Lit., 1995 WL 222177, *4 (E.D.La.1995) (“Separate negotiation of the class settlement before an agreement on fees in generally preferable to avoid conflicts of interest between the attorneys and the class.”). 2)Complexity, Expense and Duration of the Case Without question, this case is seriously complex. Testimony from liaison counsel attests to the complexity of this case. See testimony of Calvin C. Fayard, Transcript Ap. 18, pp. 27:21-39:17, and Ralph Hubbard, pp. 40:16-44:18. The sheer volume of relevant material alone supports this finding. The alleged liability in this litigation extends for thirty years, beginning in the 1960s. Records kept at the site from the beginning of the recycling business until 1977 were burned in a fire at the site, so the majority of the evidence had to be gathered through reliance on memories of site workers, truck drivers, residents of Livingston Parish, and employees at defendants’ facilities employed during those years. Enormous resources have been spent just locating these witnesses. Counsel testified that if it were possible to gather all the files from the PSC’s and defendants’ offices together in the Courtroom, the entire room would be filled. It is the estimate of this Court that paper would flow into the Courthouse corridors as well. More than 2,300 party-defendants are in the record of the Clerk of Court. About 530 attorneys appeared before the Court to file and argue motions, and countless teams of attorneys provided support in the form of research and writing for each one that actually appeared. Cases of this magnitude that have been vigorously litigated every step of the way, for eleven years, are an enormous financial and psychological burden on all parties involved. This Court has repeatedly heard from the parties that at least one significant factor in the settlement process was the opportunity to “stop the bleeding” for the client. Changes in the applicable law of the State of Louisiana over the 30 year period create major problems in Phase III preparation, as was the case as both sides struggled mightily to prepare a joint submission on the jury interrogatories, only to gain a reprieve with the trial continuance. It is the opinion of this Court that this case was and continues to be sufficiently complex, that eleven years has taken its toll financially and emotionally on all parties, that the prospect of a trial lasting months and even years if these parties remain in the litigation all weigh heavily in favor of finding that partial resolution by settlement is a reasonable and equitable option for all parties involved. 3) Stage of the Proceedings The tort trial was originally scheduled for April 1, 1997, a date that this Court had etched in stone for three years since the inception of the Case Management and Scheduling Order in 1994. At that time, the case was already in its 7th year of development through rigorous motion practice in state court prior to being removed to federal court. Each of the settlement agreements at issue was confected well after discovery deadlines for that particular group of settling parties. In fact, the parties to the 5th SPSA were busily preparing jury interrogatories and when their settlement was completed. Liaison counsel testified that all parties were fully aware of the strengths and weaknesses of each side’s case. Transcript Ap. 18, pp. 33:13, 41:15, 51:10. All parties were in an excellent position to assess their respective positions, and this Court has a sound basis to judge whether the settlement is fair and reasonable. 4) Probability of Plaintiffs’ Success on the Merits It is this Court’s opinion, even after having come within two weeks of trial, that it would be pure speculation to predict with any degree of certainty the probability of the Plaintiffs’ success at trial. A primary reason for the uncertainty is the extreme volatility of the issues presented in this case. The subject matter of the case, allegations of dumping of hazardous materials into unlined pits, burning or burying drums containing carcinogens at the site, and other such egregious activities, are extremely sensitive in this State due to the general perception that Louisiana and its citizens have long been victims of this type of activity. The seriousness of exposure to just two of the hazardous chemicals found at the Combustion site — benzene and toluene — has been brought to the attention of the public by the extreme safety precautions taken by the State after a recent toluene spill along Interstate 10 and a benzene leak from a barge on the Mississippi River. It is certainly possible that the jury could find in favor of the Plaintiffs and could impose a very heavy burden for damages on defendants who are found to have caused the damages. If the jury finds liability and then considers damages, the probability is high that the damages awarded to Plaintiffs will be large. It is also not lost on the Court that counsel for the compromising parties, some of the most able attorneys in the country, when armed with extensive knowledge of the facts, decided that settlement rather than a jury trial was in the best interest of their clients. This Court must accord due respect to the judgment of counsel. On the other hand, Plaintiffs will have very serious legal and evidentiary hurdles to meet in order to get their case to the jury. Plaintiffs’ absolute and strict liability theories based on ultrahazardous activities pursuant to La.Civ.Code art. 2315, garde under La.Civ. Code art. 2317, and product liability under La.Civ.Code art. 2315, are being closely studied by the Court. Summary Judgment motions are pending on these allegations. Suffice it to say that the Plaintiffs acknowledge the difficulty in carrying this burden of proof. Even without the difficulties with their legal theories, Plaintiffs will have substantial difficulties of proof. The site owners have no documentary evidence of the activities at the site prior to 1977. Until the site was closed, there was no regular testing of the air, water, and earth surrounding the site, making problematic the proof of the nature and extent of offsite migration of the chemicals located at the site. The sheer number of chemicals found at the site coupled with the paltry few studies available of the harmful effects of these chemicals when mixed will make proving causation difficult. Without documented evidence regarding offsite migration to prove a causal link between the hazardous chemicals and the individual plaintiff’s injury will be difficult. The question of whether Plaintiffs will be able to carry this burden at trial will be decided by the jury. Neither this Court, Plaintiffs, nor defendants can possibly anticipate what a jury will actually find. These questions are sufficiently serious to justify settlement. 5) Range of Possible Recovery Attached to the Preliminary Settlement Agreement, document # 5826, as Exhibit L is the PSC’s evaluation of the optimum value of the plaintiff class’ claims. Approximately 1,000 claimants have asserted claims for major injuries, including death, cancer, and leukemia. The PSC evaluates these claims as worth an optimum average of $500,000 per claim. Approximately 4,500 claimants have asserted claims for lesser injuries caused by exposure within two miles of the Combustion, Inc. site. The PSC assigns an optimum average value of $50,000 to each of these claims. Finally, approximately 4,500 claimants have asserted claims for lesser injuries caused by exposure greater than 2 miles from the site. The PSC assigns these an optimum average value of $10,000 per claim. The sum total of plaintiffs’ assigned values is $770,000,000. After a thorough review of the PSC’s submission, this Court finds that the Plaintiffs’ evaluation of the upper range of possible recovery is reasonable. If the PSC is able to prove at trial every element of their claims, total recovery by the Class could well amount to $770 million. It is an accepted practice for plaintiffs’ counsels’ evaluation of their case to be geared toward its optimum value. However, in light of the substantial burden of proof and the significant difficulties associated with success on the merits, a similar possibility exists that recovery by class members could be nothing. These extremes highlight reasonable settlements in all cases. This case is no exception. The proposed settlement need only reflect a fair, reasonable, and adequate estimation of the value of the ease in view of what might happen at trial. The PSC has demonstrated that this proposed settlement meets that burden. 6) Opinions of Class Counsel, Class Representatives, and Absent Class Members The opinions of Class counsel, Class representatives and the Special Master unanimously favor the settlements as proposed. Transcript Ap. 18, pp. 39:18, U0:16-1.6:22, 56:25. Members of the Plaintiffs’ Steering Committee and Class representatives have filed affidavits into the record recommending approval of the settlements as proposed. With regard to the Due Process requirement that an absent party be given an opportunity to be heard, this Court is not aware of any class member who was in any way prevented, deterred, or discouraged from presenting objections to the Court, either in writing or by appearance. As noted below, this Court is not aware of any objection filed or brought to the attention of any member of the PSC or any other Plaintiffs’ counsel as to the fairness, reasonableness, and adequacy of these four proposed settlement agreements. The “Important Notice of Hearing” was mailed to all Plaintiffs’ counsel of record as well as all class members who have completed Proof of Claim forms. Notice was also published in two local newspapers, the Baton Rouge Morning Advocate and the Denham Springs News on March 13, 1997. See Exhibit FH3-J-2 in documents presented at Ap. 18 hearing. This Court finds that the direct mailings as well as publication in two local newspapers is reasonable and sufficient to satisfy the Due Process requirement of notice, as well as all notice requirements of Fed.R.Civ.Pro. 23. E. Objections to the Proposed Settlements Not one Class member objected in writing to the proposed settlements, and no objection was raised orally at the hearing. At the start of the April 18th hearing, the Court invited Class representatives to join counsel for compromising parties inside the well to view the exhibits and participate in the hearing. Transcript at p. 18. The Court provided Class representatives and Class members in attendance the opportunity to question each witness and to ask questions throughout the seven-hour hearing. No questions were raised regarding this first phase, indicating to the Court that the Class members present regarded the proposed settlements to be fair, reasonable, and adequate. F. Conclusion — Phase I For the foregoing reasons, this Court finds that the Second Supplemental Preliminary Settlement Agreement, the Third Supplemental Preliminary Settlement Agreement, the Fourth Supplemental Preliminary Settlement Agreement, and the Fifth Supplemental Settlement Agreement are fair, reasonable, and adequate as proposed. These settlements are in the best interest of the Class, and there is no dissent among Class members to the proposal. The result of this finding is that the total sum of approximately $32,451,150 will be added to the Settlement Fund, bringing the total principal amount of the Settlement Fund on hand for consideration in Phase II of this Memorandum to be approximately $127,396,000. V. Partial Disbursement — Phase II A. Overview The focus of the second phase of the hearing is partial disbursement to the Class. It is the intent of the Court to set up the process so that each payment to a Class member is issued free and clear of Class expenses to date, such as costs of litigation, costs unique to class actions, and attorneys’ fees. From the total principal on hand, referred to as the Settlement Fund, the Court will direct the Special Master to deduct such expenses as are approved as a result of the April 18, 1997 hearing and to initiate the process of disbursing the remaining amount to the Class this fall. The amount to be disbursed is heretofore referred to as the Claimants’ Fund. To this end, the Court ordered the Special Master to recommend categories of “reserves” for the purpose of budgeting sufficient funds to cover these expenses. After hearing testimony from the Special Master, experts, liaison counsel, and the court-appointed-disbursing-agent (CADA) regarding the purpose and amount of the reserves, and for the reasons that follows, the Court adopts completely the Special Master’s recommendations: 1) Indemnity Fund in favor of compromising parties of $2,000,000, held for a period of 13 months after the conclusion of litigation in all respects, after which it will be disbursed at the discretion of the Court for the benefit of the Class; 2) PSC liability fund of $1,000,000, held for a period of 13 months after the conclusion of litigation in all respects, after which it will be disbursed at the discretion of the Court for the benefit of the Class; 3) Class distribution costs and taxes of $500,-000 plus accrued and future interest on the Settlement Fund; 4) Litigation costs of 6%; 5) Class administration costs of 6%; and 6) Attorneys’ fees 36%. Further, the Court adopts the following stipulations regarding management of the reserves. 1) The maximum reserves and these stipulations for management of the reserves shall apply to the principal Settlement Fund on hand as of March 7, 1997 and all accrued interest on this amount to date and thereafter. 2) Any payment or withdrawal from any of the reserves shall be made by Order of the Court, and then only upon recommendation of the court-appointed-disbursing-agent (CADA) and in accordance with the relevant stipulation stated herein. The request shall be presented to CADA with the appropriate documentation. CADA shall review, summarize, and categorize each request and make its recommendation accordingly to the Court, attaching the request, documentation, and certificate of review. The Court may then issue a formal order or other action the court deems appropriate and in the best interest of the Class. 3) Withdrawal of funds and intra fund transfers as specified in 2) shall be allowed without further notice to the Class. 4) Intra fund transfers shall be allowed exclusively among the Class administration reserve, the litigation reserve, and the Class distribution reserve. 5) Intra fund transfers shall not diminish the amount of the Claimants’ Fund. 6) The amount of the attorneys’ fee reserve, as designated by this Judgment shall not be enhanced by any funds from the other maximum reserves or the Claimants’ Fund. The Court shall only allow payments out of and intra reserve transfers from the attorney’s fee reserve but only after following the procedure stipulated herein and only after notice to all plaintiffs’ counsel and a hearing on the matter. 7) Request for payment, withdrawal, or transfer of funds from the Indemnity Fund must be made by motion and served on all plaintiffs’ attorneys of record and through Liaison Counsel, and on all settling parties who shall be given the opportunity to be heard by the Court before any action is taken on the matter. 8) Request for payment, withdrawal, or transfer of funds from the PSC Liability reserve must be made by motion and served on all attorneys’ of record, or on a Court-designated plaintiffs’ Liaison Counsel, and these parties shall be given an opportunity to be heard by the Court before any action is taken on the request. 9) The purpose of setting these reserves at maximum amounts is to determine a minimum amount of funds available for immediate disbursement to the Class. Any amount remaining in any of the reserves after payment of the appropriate expenses, after any necessary transfers, and after the appropriate lapse of time shall be used for the benefit of the Class at the discretion of the Court. B. Reserves 1. Indemnity and Liability Reserves The Special Master recommended an indemnity fund of $2,000,000 and a liability fund of $1,000,000 for the settling parties and the Plaintiffs’ Steering Committee respectively. The settling parties’ indemnity fund was set up in the original Preliminary Settlement Agreement that was formally approved by the Court on February 7, 1996. See Written Reasons, document #1160. Each subsequent group of settling parties adopted the wording of that provision and became protected parties as if each had been a party to the original agreement. The liability fund for the PSC was recommended by the Special Master in the same vein as the settling defendants’ indemnity fund. Reserves similar to these are common in class actions such as the instant case. Both funds are to be held “for a period of 13 months after the conclusion of the litigation in all respects,” and any remaining funds are to be used for the benefit of the Class at the discretion of the Court. See Important Notice of Hearing, exhibit 2, p. 3, # 9 and pp. 2-3 # 7e, f. The funds in these two reserves are not available for intra reserve transfer prior to the end of the required 13 months after the end of litigation in all respects. Transcript April 18, p. 171. At that time the remaining funds shall be used at the Court’s discretion for the benefit of the Class. Sufficient notice shall be given to the affected parties if the Court receives a request for use of funds in either reserve. It is the opinion of this Court that these reserves are necessary, are reasonable as proposed, and are sufficient to cover indemnity and liability contingencies. 2. Litigation, Class Administration, and Class Distribution Reserves The Special Master has proposed a 6% maximum-cap reserve each for litigation costs and Class administration costs, and $500,000 plus accrued and future interest on the Settlement Fund for Class distribution costs. Testimony at the hearing established that litigation costs includes the typical costs of maintaining a lawsuit, such as expert witness’ fees, filing costs, and staff attorney costs. Class administration costs are those that are unique to a class action and would not occur in a standard lawsuit, such as the costs of fairness hearings, notices to the Class, newsletters to the Class, and proof of claims offices. The distribution costs are those expenses associated with setting up, managing, and maintaining the disbursement office for the Class. For example, to create the disbursement algorithm, the Special Master has hired medical experts to evaluate each claim involving medical injury. Disbursement costs also include the costs of setting up special accounts for interdicts and minors. Transcript April 18, testimony Hugh Sibley, pp. 151-176 and Daniel Clavier-CADA, pp. 179-188. The Special Master’s recommendations are based on his experience as an attorney and mediator and on the opinions of both Mr. Sibley, the financial specialist on the PSC, and Mr. Clavier, representing CADA. In the event that one reserve is under-funded and another over-funded, the Court shall have the authority to transfer needed funds from the excess to the under-funded reserve, but only after the request is reviewed by CADA, recommended to the Court, and approved by formal Order of the Court. This Court accepts the opinions of the Special Master, the PSC financial specialist, and CADA regarding the sufficiency of these more technical reserves and is satisfied that the amount of each of these reserves is reasonable as proposed. 3.Attorneys’ Fees The Court is asked to consider the Special Master’s recommendation of a maximum-cap reserve of 36% for attorneys’ fees. The Court has carefully reviewed the testimony presented at the hearing, as well as the case law in this and other Circuits. Based on this review, and the Court’s intimate knowledge of the unique nature of this ease and the extremely sophisticated and creative compromises that have resulted in closure for hundreds of defendants and for the Class, and for the reasons below, the Court finds that a maximum reserve of 36% is reasonable. a) Methodology As a general rule a court may not award attorneys’ fees to a prevailing party unless expressly authorized by statute. Alyeska Pipeline Co. v. Wilderness Socy, 421 U.S. 240, 95 S.Ct. 1612, 44 L.Ed.2d 141 (1975). Two major exceptions to this rule are the power of the court to award fees against a party who has acted in bad faith and to award fees to counsel who has created a benefit for third parties, such as a common fund for the benefit of the class, where the fee award and expenses are taken out of the common fund created. Id. A district court may use its discretionary powers to determine what is a reasonable and fair award from a common fund, where the fund itself represents the benchmark from which reasonableness is measured. 3 Herbert New-berg, Alba Conte, Newberg on Class Actions, Third Edition, § 14.03 (1992) (Hereinafter Newberg at § —). It is important for class members to understand what their obligations are to class counsel for costs and fees. Newberg at § 1401. When the class action successfully recovers a fund for the benefit of a class, it is long settled that the attorneys who created that class recovery are entitled to be reimbursed from the common fund for then-reasonable litigation expenses, including reasonable attorneys’ fees. Newberg § 14.02; Skelton v. General Motors Corp., 860 F.2d 250, 252 (7th Cir.1988)(“similar to the way plaintiffs attorney may be compensated by a contingency fee, a plaintiff class pays its attorneys by sharing its recovery with them.”). Class counsel are not authorized to bill the class directly for their services but must petition the court for an award of fees reasonable under the circumstances and in light of the monetary benefit created for the class. Newberg at § 14.02. i) Percentage of Fund The amount of a common fund fee award is calculated in several ways. Historically, a common fee award was determined through an exercise of the court’s discretion based on a standard of reasonableness under the circumstances. See Central Railroad & Banking Co. of Georgia v. Pettus, 113 U.S. 116, 5 S.Ct. 387, 28 L.Ed. 915 (1885); Sprague v. Ticonic Nat’l Bank, 307 U.S. 161, 59 S.Ct. 777, 83 L.Ed. 1184 (1939). As courts acquired more experience in awarding fees from common funds, fee patterns began to reflect a percentage award of the common fund recovered. In re: Quantum Health Resources, 962 F.Supp. 1254, 1256 (C.D.Cal.) (1997) (and authorities cited therein). The rationale behind awarding a percentage of the fund to counsel in common fund cases is the same as that which justifies permitting contingency fee arrangements in general. Id. The underlying premise is the existence of risk — the contingent risk of nonpayment. Thus, for a contingent fee to be appropriate, there must be a realistic risk of nonrecovery. Id. The size of th