A special master reviewing legal fees in a securities case in which the Arkansas Teacher Retirement System was lead plaintiff has approved a settlement of the dispute.  The master found a $75 million fee was reasonable in the case, but found some fault in how the legal fees were handled and recommends the lead law firm pay $4.8 million to the class of plaintiffs and other law firms.

A federal court hearing on the matter is set Oct. 15 in Massachusetts. The Arkansas Teacher Retirement System has been ordered to appear that day.


This is the case in which a Texas law firm with connections in Arkansas helped connect ATRS with the lead law firm, Labaton Sucharow. The Texas firm got $4.1 million as a finder’s fee. The case produced a $300 million judgment for ATRS andf many other clients against State Street Bank and Trust.

Here’s the special master’s recommendation.


The case has been viewed as holding potentially sweeping significance in shaping class action litigation.

In the settlement, the Labaton firm acknowledges a need for “more transparency.” It acknowledges, too, a failure to follow “best practices” in terms of its arrangement with the Texas lawyer, Damon Chargois. But the special master found that were no violations of the rules of professional conduct. Some $700,000 of the Chargois fee will be returned to the class of plaintiffs.


The master also found that Labaton could continue as lead counsel and ATRS as lead plaintiff. George Hopkins, executive director of ATRS, has said the fee arrangement was reached before he became head of the agency, but he’s also defended the work as beneficial to ATRS.

Labaton Sucharow issued this statement:

We are pleased to have reached an agreement with the Special Master on terms we can propose to the Court and believe the resolution is in the best interest of the entire consumer class as well as counsel involved in the State Street case. The Master’s recommendation that we maintain our role as lead counsel and that our client Arkansas Teacher Retirement System continue to serve as class representative are important elements of the agreement and hopefully reflect our collective achievement in the substantial recovery secured for the class

Throughout the entirety of this case, we maintained that we were compliant with all federal rules as well as the laws in Massachusetts regarding disclosure of third-party referral payments. The Master concurs in the proposed resolution that the payment made to referring counsel did not violate any rules of professional misconduct.

However, we recognize that the payment was outside the norms of a traditional case-specific referral fee relating to a single matter, and that our disclosure fell short of emerging best practices. We understand the benefit of disclosure to the Court on all referral payments regardless of whether there was a specific directive to do so.

As a result, we are committed to implementing these emerging best practices at our firm and welcome the opportunity to become a leader vis a vis best practices for fee petitions, retention agreements, and referral practices across the industry.