Theodore H. Frank Center for Class Action Fairness 1718 M Street NW, No.

236 Washington, DC 20036 (703) 203-3848 tfrank@gmail.com January 24, 2013

The Honorable Sidney H. Stein U.S. District Judge Daniel Patrick Moynihan U.S. Courthouse 500 Pearl St. New York, NY 10007-1312 Courtroom: 23A Fax: (212) 805-7924

VIA FACSIMILE Re: In re Citigroup Inc. Securities Litigation, No. 07 Civ. 9901(SHS) Request for Informal Discovery Conference Pursuant to L. R. 37.2

Your Honor, I have filed a pro se objection to the Rule 23(h) request in the above titled case (Dkt. No. 181) and a declaration and expert report in support of this objection (Dkt. No. 182); I plan to supplement it with at least one additional expert report by the new March 8 deadline. Plaintiffs have taken the objection seriously enough that they devoted twenty-three pages of their brief (Dkt. No. 195) and over forty-five pages of a separate declaration (Dkt. No. 196) to respond to it. (Plaintiffs also provide a chart listing twentyfive objections I have previously been involved in. Dkt. No. 196-3. They fail to mention that I won outright victories, fee reductions, or settlement improvements in seventeen of those twenty-five objections, with another four of the remaining eight still pending resolution. It is unclear why they think this track record militates against my substantive objection.) As documented in my earlier declaration, I have made inquiries to class counsel regarding whether they were willing to voluntarily provide me with discovery

Honorable Sidney H. Stein January 24, 2013 page 2 regarding their request for $100.3 million award. Specifically, I seek (1) to depose plaintiffs two experts that submitted opinions regarding the reasonableness of class counsels fee request, and (2) to discover information regarding the hourly rates assigned to the contract attorneys in class counsels lodestar report. Class counsel has refused my requests and argued to both me and this Court that I am not entitled to any discovery. See Reply Memorandum in Support of Request for Fees, Dkt. 195 at 24-25. While objector discovery is not absolute, the rule in the Second Circuit is that a class action settlement offer by a lower court must be overturned if it failed to allow objectors to develop on the record facts going to the propriety of the settlement. Detroit v. Grinnell Corp., 495 F.2d 448, 462 (2d Cir. 1974) (emphasis added and quotations omitted). The limited discovery I seek is appropriate and necessary for several reasons. First, the settlements structure prevents an adversarial process regarding class counsels fee request. Plaintiffs rely upon Malchman v. Davis, 761 F.2d 893 (2d Cir. 1985), as justification for their stonewalling, but that case supports the limited discovery that I seek. The Second Circuit first noted that On first impression, the district court's denial of discovery appears in conflict with an earlier opinion requiring scrutiny of the issue on which objectors wanted discovery. Id. at 898. But Malchman affirmed the denial of discovery only because defendants had conducted discovery at length on the issues where the objectors wished discovery. Id. at 898-99. Here in contrast, there has been no discovery or testing of the claims made in the fee request. The settlement has a clear sailing provision permitting class counsel to make their $100.3 million request without challenge from the defendants. See Settlement, Dkt. 155-1, 8. Such a clause by its very nature deprives the court of the advantages of the adversary process. Weinberger v. Great N. Nekoosa Corp., 925 F.2d 518, 525 (1st Cir. 1991). Class counsels submissions in connection with their fee request are untested, and will remain untested without the requested discovery. Denying discovery here would unfairly prejudice class members interests in responding to class counsels fee request. Second, the requested discovery seeks necessary information that has not been disclosed or otherwise subject to discovery. My objection contains numerous complaints regarding the soundness of the methodologies plaintiffs experts employed and the sufficiency of the factual predicates on which they rely. See Objection, Dkt. 181 at 6, 8, 14-19. Plaintiffs experts have not been deposed and examination is necessary to test such opinions. Vigorous cross-examination is an essential minimum of testing shaky but admissible evidence. Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 US 579 (1993) (citing Rock v. Arkansas, 483 U.S. 44, 61 (1987)); accord Gayton v. McCoy, 593 F.3d 610, 616, 619 (7th Cir. 2010). If an objector doesnt cross-examine these experts, no

Honorable Sidney H. Stein January 24, 2013 page 3 one will; it would be most efficient for the cross-examination to occur in deposition and be summarized in briefing, rather than take place for hours at a fairness hearing. Unless the Court is to exclude the expert witnesses entirely, depositions are required. Information regarding the contract attorneys on class counsels lodestar report is also necessary. A comparison between the lodestar report and the attorney resumes submitted by class counsel reveals that $28.1 million of the $51.4 million lodestar amount was based on work performed by over 40 contract attorneys. See Exhibit E to Memo in Support of Fees, Dkt. 171-5. As set forth in my objection, these contract attorneys were likely being paid between $20 to $45/hour because they were performing low-skilled work. See Objection, Dkt. 181 at 11-12. (And it turns out my objection was insufficiently cynical: reporting from an independent journalist on this case reveals that the attorneys were paid $32/hour at most, and otherwise contradicts the assertions in plaintiffs briefing and declarations. See Daniel Fisher, Class-Action Firms Capitalize On Wretched Market For Law-School Grads, Forbes.com (Jan. 4, 2013).) Yet lead counsel assigned greatly exaggerated hourly rates for those contract attorneys between $325 to $550/hour. See id. This is wrong. The lodestar figure should be based on market rates in line with those [rates] prevailing in the community for similar services by lawyers of reasonably comparable skill, experience, and reputation. Reiter v. MTA N.Y. City Transit Auth., 457 F.3d 224, 232 (2d Cir. 2006) (emphasis added). Simply put, Michelangelo should not charge Sistine Chapel rates for painting a farmers barn. Ursic v. Bethlehem Mines, 719 F.2d 670, 677 (3d Cir. 1983). Accord, e.g., Detroit v. Grinnell Corp., 560 F.2d 1093, 1100 (2d Cir. 1977); Tucker v. City of New York, 704 F. Supp. 2d 347, 356 n.7 (S.D.N.Y. 2010); In re KeySpan Corp. Sec. Litig., CV 2001-5852 (ARR) (MDG), 2005 U.S. Dist. LEXIS 29068, at *53-*54 (E.D.N.Y. Aug. 25, 2005) (rejecting use of $275/hour attorneys to do document review). And there is no question that attorneys who have to resort to $32/hour jobs in the unpleasant conditions of temporary contract work are not even Michelangelo. Discovery is necessary to test plaintiffs assertions about the tasks of the contract attorneys. For example, plaintiffs claim that they needed highly-skilled attorneys to do the work that was assigned to them. There is readily available evidence that could prove this that plaintiffs did not submit to the Court. For example, did Hudson Legal (and other third-party providers) advertise for specific skills and experience? (The indiscriminate $32/hour rate reported by Fisherpaid both to experienced attorneys and to recent law-school grads (and a 1998 graduate who was not admitted to the bar until 2009, see Dkt. 196 158)certainly suggests a cannon-fodder scenario.) Did plaintiffs put the contract-work out for bid, and, if so, how was the project described? It

Honorable Sidney H. Stein January 24, 2013 page 4 would be telling if plaintiffs are representing to the court that the attorneys were performing highly-skilled work meritorious of $550/hour rates, but represented to third-party providers that the work was not specialized in order to negotiate lowerpriced proposals for contract-attorney work. What do the contracts with the third-party providers say? (And even if two of the contract attorneys were doing substantive work (Dkt. 196 103), it doesnt mean that all $26 million of lodestar attributed to the attorneys was for substantive work.) Other aspects of the declaration are suspiciously phrased in the passive tense that leads to the inference that a third party was the actor. E.g., Dkt. 196 129 states that contract attorneys were established in offices one block away. By whom? Who was responsible for that overhead? Unless the Court is willing to draw negative inferences and reject class counsels contentions out of hand, it is necessary to test these issues through the discovery process. With respect to the multiplier, class counsel argues that they incur substantial risk in engaging in securities cases, but they never directly dispute my demonstration (Dkt. 181 56-67) that the vast majority of hours and investment class action attorneys make in securities cases are in ultimately successful cases, and that risk is thus relatively low. (Indeed, class counsel inadvertently concede my argument with respect to this case by acknowledging that most of their lodestar was not incurred until 2011, well after the motion to dismiss was decided in November 2010. Dkt. 196 96 ff.) It would be easy enough for each class counsel to provide a list of all PSLRA cases resolved between 2008 and 2011, the lodestar invested in each case, and the ultimate fees awarded. If, as I contend, the overwhelming majority of hours are expended in cases where lodestar is recovered, a 1.9 multiplier is unnecessary to incentivize attorneys to engage in securities litigationespecially when so much of the risk actually reflects an investment in temporary attorneys paid $32/hour who can be terminated costlessly at cases end. This is a purely empirical question, measurable by objective evidence that does not need to be resolved by a battle of the experts: for what percentage of hours do PSLRA class action attorneys fail to recover their lodestar? Again, unless the Court is willing to draw negative inferences and reject class counsels contentions out of hand, discovery is necessary. I have other information that I do not wish to disclose at this time that I believe refutes claims in the class counsels sworn declaration, but cannot develop that impeaching information without limited document and deposition discoverythe reasonable investigation that Rule 11 requires. Third, the discovery I seek is limited to information regarding my specific objections to class counsels fee request. I am not seeking information regarding the

Honorable Sidney H. Stein January 24, 2013 page 5 underlying merits of the litigation and do not seek to re-litigate this matter. Indeed, the limited discovery will not cause delay in these proceedings and, if permitted to proceed at the beginning of February, should be complete well in advance of the fairness hearing. Permitting such limited discovery is particularly appropriate in light of class counsels large Rule 23(h) request. The court owes a fiduciary duty to absent class members, and the best way to test the claims of entitlement to $100.3 million of the classs money is through the adversary process. Plaintiffs claim to be entitled to ask for that money all but ex parte should be rejected. I am now prepared to file a motion to compel discovery. Local Civ. R. 37.2 provides that such a motion shall not be heard unless counsel for the moving party first requested an informal conference with the Court by letter and such request has either been denied or the discovery dispute has not been resolved as a consequence of such a conference. Please let this letter serve as a request for that informal conference. Very truly yours, /s/ Theodore H. Frank Theodore H. Frank cc: Counsel of record via email