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Daily Archives: March 24, 2015

Is the Price Right? An Empirical Study of Fee-Setting in Securities Class Actions

Baker, Lynn A. and Perino, Michael A. and Silver, Charles, Is the Price Right? An Empirical Study of Fee-Setting in Securities Class Actions (February 11, 2015). Columbia Law Review, 2015, Forthcoming; U of Texas Law, Law and Econ Research Paper; St. John’s Legal Studies Research Paper No. 15-0003. Available at SSRN: http://ssrn.com/abstract=2584649

“Every year, fee awards enable millions of people to obtain access to justice and strengthen the deterrent effect of the law by motivating lawyers to handle class actions. But the process by which judges decide how much to pay lawyers remains a black box. Settlements go in one side; fee awards come out the other. The inputs and outputs have been studied, but the actual operation of the fee-setting mechanism has not. Consequently, it is difficult to know why judges award the amounts they do or whether they size fee awards correctly. Both numerically and in terms of dollars recovered, securities cases dominate the federal courts’ class action docket. We therefore undertook to peer into the fee-setting black box by studying in detail all of the 434 securities class actions that settled in federal district courts from 2007 through 2012. We examined the actual court filings in each case to create an original, comprehensive dataset of information on all points at which federal judges are likely to consider issues relating to fees. These data enable us to paint a picture of the fee-setting process that is unusually detailed and nuanced and that falsifies many common beliefs.  Among our major findings are that: (1) federal judges often deviate from the path Congress laid out in the Private Securities Litigation Reform Act (PSLRA), which requires lead plaintiffs to set the terms of class counsel’s retention and federal judges to serve as backstops against abuses; (2) fees tend to be lower in federal districts that see a high volume of securities class actions than in districts that handle these cases less often; (3) fee cuts are significantly more likely among judges that see a high volume of securities class actions than among low volume judges; (4) the well-known “decrease-increase” rule, according to which fee percentages decline as settlements become larger, operates mainly in high-volume districts; and (5) judges appear to cut fees randomly, that is, on the basis of their own predilections rather than the merits of fee requests. Finally, we learn that so-called “lodestar cross-checks,” which require judges to consider the “time and labor expended by counsel” and other factors to ensure against excessive fees, accomplish nothing. Actual fee awards reflect something closer to a pure “percentage of the fund” approach. In sum, we found little evidence that the actions currently taken by the courts in securities class actions move class counsel’s fees closer to the “right price.” We therefore propose a set of procedural reforms which courts could easily adopt that would make fee-setting in securities class actions more transparent, more compatible with the normative goals of the PSLRA, and more predictable. The reforms would encourage lawyers to invest optimally in class actions, with salutary effects for investors seeking compensation and the integrity of the financial markets.”

New BIS Working Papers – Foreign exchange intervention, Liquidity Squeeze, Global Asset Allocations Shifts, Macroprudential Policy, EMEs

Foreign exchange intervention: strategies and effectiveness – “Foreign exchange intervention has been actively used as a policy tool in many economies in Asia and elsewhere. In this paper, we examine two intervention rules (leaning against exchange rate misalignment and leaning against the wind), utilised with varying degrees of transparency, based on a simple model with… Continue Reading

Agencies Provide Feedback on Resolution Plans of Three Foreign Banking Organizations

Firms Required to Address Shortcomings in 2015 Submissions – “The Federal Reserve Board and the Federal Deposit Insurance Corporation (FDIC) on Monday announced that they had completed the reviews of resolution plans submitted in 2014 by three large, foreign banking organizations and had issued feedback letters to each institution. In their review of the resolution… Continue Reading

It’s been 26 years since Exxon Valdez spilled 11 million gallons of oil off Alaska

Via NOAA – “On March 24, 1989, the tanker Exxon Valdez grounded on Bligh Reef in Alaska’s Prince William Sound, rupturing its hull and spilling nearly 11 million gallons of Prudhoe Bay crude oil into a remote, scenic, and biologically productive body of water. Prior to the 2010 Deepwater Horizon oil spill, it was the… Continue Reading

Dying in America: Improving Quality and Honoring Individual Preferences Near the End of Life

“For patients and their loved ones, no care decisions are more profound than those made near the end of life. Unfortunately, the experience of dying in the United States is often characterized by fragmented care, inadequate treatment of distressing symptoms, frequent transitions among care settings, and enormous care responsibilities for families. According to this report,… Continue Reading

Explaining the Decline in the Number of Banks since the Great Recession

Federal Reserve Bank of Richmond – March 2015, No. 15-03. Explaining the Decline in the Number of Banks since the Great Recession. Roisin McCord, Edward S. Prescott and Tim Sablik. “The financial crisis of 2007–08 was a major shock to the U.S. banking sector. From 2007 through 2013, the number of independent commercial banks shrank… Continue Reading

New GAO Reports – Drug Discount Program, Homeland Security, James Webb Space Telescope, NASA, Unmanned Aerial Systems

Drug Discount Program: Status of GAO Recommendations to Improve 340B Drug Pricing Program Oversight, GAO-15-455T: Published: Mar 24, 2015. Publicly Released: Mar 24, 2015. Homeland Security: Action Needed to Better Assess Cost-Effectiveness of Security Enhancements at Federal Facilities, GAO-15-444: Published: Mar 24, 2015. Publicly Released: Mar 24, 2015 James Webb Space Telescope: Project Facing Increased… Continue Reading