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NEWARK, N.J. — In July 2002, after 30 months of litigation, U.S. District Judge Joel Pisano stepped in to mediate the Lucent Technologies Inc. securities class action. The result was his Dec. 12 approval of a settlement worth about $650 million, the third-largest securities settlement ever. Now comes the hard part for the judge: deciding how much to pay the plaintiffs’ lawyers, who collectively are seeking $107 million in fees for their efforts in In re Lucent Technologies Inc. Securities Litigation, 00-CV-621. The co-lead counsel for the biggest of five consolidated cases — Milberg Weiss Bershad Hynes & Lerach and Bernstein Litowitz Berger & Grossman, both of New York — are asking for 17 percent of the $517 million they negotiated for in the class action: almost $88 million. While the two firms would get the bulk of the fees, some would be shared with dozens of firms nationally that have filed claims. The balance would go to the legal teams that represented claimants in the four other cases — employees, bond and note holders, and shareholders of another company, Winstar, harmed by Lucent’s alleged wrongdoing. Those plaintiffs’ lawyers are seeking a higher percentage reward, which is not unusual, as fees are usually lower for the bigger settlements. When Pisano approved the settlement, only 36 claimants out of a possible 3 million had objected to the deal and decided to opt out, thus reserving the right to sue on their own. All fees and expenses — the co-lead counsel also seek $3.5 million in expenses — will come out of the five funds set up for the claimants. Those 36 claimants all made the same point: The fees are excessive compared with the payout, which amounts to no more than 15 cents a share, and possibly as low as 11 cents a share, for anyone who bought Lucent stock before it crashed. Typical was T. Tucker Hobgood, who bought 100 shares at $74 a week before it dove to the mid-$50s, at which point he bought another 50 shares. All told, Lucent dropped from almost $80 in 1999 to 55 cents by the fall of 2002 after disclosures of inflated revenue reports and accounting shenanigans. “I’ll get $15, with the plaintiffs’ lawyers making about $4.50 off me and getting reimbursed another $1.50. Not to unduly hammer only one side of the equation. The company I still own part of paid untold sums to its lawyers to grind the plaintiffs under their feet,” Hobgood wrote to Pisano. “I lost virtually my entire investment of $10,000. There is nothing fair about this process or this settlement to me. It is a complete waste of time to recover less than one-fifth of 1 percent of a loss,” he continued. Hobgood, himself an Atlanta lawyer, was backed by John Pentz of the Class Action Fairness Group in Sudbury, Mass., who weighed in on behalf of another claimant. Pentz said the plaintiffs’ fee should be 10 percent. He pointed to two other huge class actions in the New Jersey district, In re Cendant Corp. Prides Litigation, and In re Prudential Ins. Co. Sales Practice Litigation. In the Cendant settlement of $3.19 billion in 2000, the fee came to 1.7 percent. In the Prudential case, which settled in excess of $2 billion, the Third Circuit U.S. Court of Appeals pegged the fee at 6.7 percent. Michael Rinis, of Rinis Travel Service Inc. in Silver Spring, Md., whose profit-sharing trust held Lucent stock, told Pisano by letter last month that the fee request of the co-lead counsel is “excessive and unreasonable.” He noted there was no trial and argued that the fees were not warranted by the amount of discovery. Pisano stayed all proceedings in September 2002, two months after he stepped in to mediate. But the lead plaintiffs’ lawyers say the fee request is fair and justified, particularly in light of what shareholders may receive down the road if Lucent bounces back. That’s because much of the settlement is in the form of stock and, more important, warrants. Tim O’Brien is a reporter for The New Jersey Law Journal , a Recorder affiliate based in Newark, N.J.

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