In re Petrobras Securities Litigation

Docket number: 14-cv-9662 (S.D.N.Y.)

In this class action plaintiffs alleged violations of the Securities Exchange Act of 1934 and the Securities Act of 1933 arising from allegedly material misstatements and omissions by Brazilian majority-state-owned oil company Petrobras about the value of its assets and other financial matters, internal controls over financial reporting, and the transparency of its management and operations.

The settlement reached in the case will distribute funds to class members who purchased Petrobras securities in both domestic and foreign transactions. Foreign-transaction purchasers have no claim under U.S. securities laws, however, and, as a result, the allocation of funds to them dilutes the recovery for U.S. shareholders with valid claims.

This result was reached by counsel representing both sets of purchasers, despite their sharp conflict of interests. On behalf of class member William Thomas Haynes, CCAF is objecting to the inadequate representation provided by class counsel as evidenced by this settlement process and result, as well as to the excessive fees sought by class counsel. Class counsel is seeking fees of $285 million based on nearly $100 million in overbilling in their alleged lodestar where no multiplier of the value of their time is warranted due to the low risk of the litigation or the result where the size of the recovery is largely due to the size of the class, scope of misconduct, and prior government enforcement actions.

On June 25, 2018, Judge Rakoff of the U.S. District Court for the Southern District of New York largely agreed with CCAF concerning contract attorney billing, which results in nearly $100 million additional dollars going to class members.

Given the manifest benefit to class members, CCAF submitted a modest $117,000 fee request for its time in the case, but was only awarded 10% of the fee request on the rationale that the contract attorney issue flagged only took about one tenth of the words of the Haynes objection. CCAF has appealed this paltry fee award; objectors who provide genuine benefit should be entitled to reasonable attorneys’ fees. On September 5, 2019, the Second Circuit panel vacated the small fee award and remanded the case for the district court to more fully explain its reasoning why work essential to the objection should not be credited.

This case was formerly a project of the Competitive Enterprise Institute and now is being actively litigated by the Hamilton Lincoln Law Institute.

Case Documents