No. 02-3780UNITED STATES COURT OF APPEALS FOR THE EIGHTH CIRCUIT

In Re BANKAMERICA CORPORATION SECURITIES LITIGATION_____________________________________

CAROL MACKAYIntervenor-Objector-Appellant

vs. HUGH McCOLL, JR., et al.,

Defendants-Appellees. 02-3783

JOHN M. KOEHLER, DAVID P. OETTING,Plaintiffs-Objectors-Appellants,

vs.HUGH L. McCOLL, JR., et al.,

Defendants-Appellees. 02-3780

Appeal from the United States District Courtfor the Eastern District of Missouri

MDL Docket No. 1264The Honorable John F. Nangle

APPELLANT CAROL MACKAY’S INITIAL BRIEF

Edward W. Cochran, Esq.OH Bar NO. 00329422872 Broxton RoadShaker Heights, OH 44120

Frank H. Tomlinson, EsquireAL Bar No. ASB-7042-T66FPritchard, McCall & Jones, LLC505 N. 20th Street, Suite 800Birmingham AL 35203

Attorneys for Intervenor-Objector-Appellant Carol Mackay

ii

SUMMARY OF THE CASE AND REQUEST FOR ORAL ARGUMENT

On April 10, 1998, BankAmerica Corporation entered into a merger agreement

with NationsBank Corporation. This merger of equals would result in the creation

of a “new” BankAmerica Corp. The merger agreement provided that NationsBank

stockholders would receive one share of stock in the “new” BankAmerica

Corporation for each share of NationsBank stock they owned. “Old” BankAmerica

Corporation stockholders would receive 1.1316 shares of “new” BankAmerica

Corporation stock. The merger was completed on September 30, 1998. Shortly

thereafter on October 14, 1998, it was disclosed that the “new” BankAmerica

Corporation was taking a $372 million charge-off (and was reversing 70 million in

related income) as the result of a bad loan to D.E.Shaw, a New York investment firm,

and that the bank’s investment was $1 billion dollars after the charge off. Not

surprisingly, on the day of the disclosure, the price of shares in the new BankAmerica

dropped $5-5/16. Between October 15 and November 18, 1998, twenty-four class

actions were filed in six federal district courts by stockholders of the predecessor

companies, the pre-merger NationsBank and the “old’ BankAmerica Corporation.

The cases were consolidated by order of the Multidistrict Litigation Panel, and

transferred to the Eastern District of Missouri, where responsibility for the MDL

action came to rest with District Judge John F. Nangle.

iii

Eventually, on January 31, 2002 during mediation before retired District Judge

Nicholas H. Politan, class counsel and the defendants reached an agreement in

principle on a proposed settlement. The agreement provided that the defendants

would pay $490 million plus interest to members of the four plaintiff subclasses. $333

million plus interest was allocated to NationsBank stockholders and $156.8 million

plus interest was allocated to “old” BankAmerica Corporation stockholders. After

notice to the class, a fairness hearing was held on May 30, 2002. Subsequently,

Judge Nangle approved both the settlement agreement and payment of fees to class

counsel. This consolidated appeal arises out of the objections of Appellant MacKay

and others to the class action settlement and concomitant attorney’s fees approved by

the district court below.

Appellant Mackay requests oral argument of thirty (30) minutes per side.

Appellant believes such argument would assist the panel in determining whether the

trial judge committed error in approving the settlement as fair, adequate and

reasonable.

iv

TABLE OF CONTENTS

SUMMARY OF THE CASE AND REQUEST FOR ORAL ARGUMENT . . ii

TABLE OF CONTENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iv

TABLE OF AUTHORITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v

STATEMENT OF ISSUES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

STATEMENT OF THE CASE AND FACTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

SUMMARY OF ARGUMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

ARGUMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5I. The notice to the class was misleading because important material

information was omitted from the Notice. . . . . . . . . . . . . . . . . . . . 5II. The Settlement should not have been approved as fair and

adequate because the strength of plaintiffs’ case far outweighs theamount recovered in the Settlement. . . . . . . . . . . . . . . . . . . . . . . . 7

IIa. Other Settlements: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13III. The Amount of Attorney’s Fees is Grossly Excessive . . . . . . . . . 14IV. Adoption of other arguments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

CERTIFICATE OF COMPLIANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

v

TABLE OF AUTHORITIES

CASES:

Behrens v. Wometco Enterprises, Inc., 118 FRD 534 (DCFL 1988) . . . . . . . . 13

Blum v. Stenson, 465 U.S. 886, 889-90, 104 S.Ct. 1541, 79 L.Ed. 891 (1984) . 2,15

Feinberg v. Aiberilia Corp. 966 F. Supp. 442 (DCLA 1997) . . . . . . . . . . . . . . . 13

Grunin v. Int’l House of Pancakes, 513 F.2d 114 (8th Cir. 1975) . . . . . . . . . . 13

In re BankAmerica Corp. Securities Litigation, 78 F.Supp.2d 976 (E.D.Missouri, 1999) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

In Re Bausch & Lomg., Inc. Securities Litigation, 183 ERD 78 (DCNY 1998). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

In re Cendant Corp. Securities Litigation, 109 F. Supp. 3d 235 (DCNY 2000). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

In Re McDonnell Douglas Equipment Leasing Securities Litigation, 838 F.Supp. 729 (DCNY 1993) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

In Re: Mego Financial Corp. Securities Litigation, 213 F3d 454 (9th Cir. 2000). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Lowenschuss v. C.G. Bluhdorn, 82 FRD 712 (DCNY 1979) . . . . . . . . . . . . . . . 14

Lyons v. Scitex Corp., 987 F. Supp. 271 (DCNY 1997) . . . . . . . . . . . . . . . . . . . 13

National Super Spuds, Inc. v. New York Mercantile Exchange, 660 F.2d 9 (2dCir. 1981) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Ohio Public Interest Campaign v. Fisher Foods. Inc., 546 F Supp. l (DC Ohio1982) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 12

vi

Petrovic, et. al. vs. Amoco Oil Company, 200 F.3d 1140 (8th Cir. 1999) . . . . 6, 7

Reed v. General Motors Corp., 703 F 2d 170 (5th Cir. 1983) . . . . . . . . . . . . . 1, 12

Reynolds v. Beneficial National Bank, 288 F.3d 277 (7th Cir. 2002) . . . . 8, 9, 13

Reynolds vs. National Football League, 584 F.2d 280 (8th Cir. 1978) . . . . . 1, 6

Slade v. Shearson Hammill Co., Inc. 79 FRD 309 (DCNY 1978) . . . . . . . . . . 14

1

JURISDICTION

The lower court had jurisdiction pursuant to 28 U.S.C. §1332 and 28 U.S.C.

§1407. District Judge Nangle entered an Order approving the proposed

settlement agreement and the revised plan of allocation on September 30, 2002.

The Order approving attorneys’ fees was entered on October 15, 2002. Mackay

timely filed her Notice of Appeal on October 30, 2002. This appeal is from those

final orders which disposed of all issues. This court has jurisdiction pursuant to

28 U.S.C. §1291 to review final decisions of the district court.

STATEMENT OF ISSUES

I. Whether the notice to the class was misleading because important

material information was omitted from the Notice. Petrovic, et. al. vs. Amoco Oil

Company, 200 F.3d 1140, 1151 (8th Cir. 1999); Reynolds vs. National Football

League, 584 F.2d 280, 285 (8th Cir. 1978); National Super Spuds, Inc. v. New

York Mercantile Exchange, 660 F.2d 9, 31 (2d Cir. 1981)

II. Whether the Settlement should not have been approved as fair and

adequate because the strength of plaintiffs’ case far outweighs the amount

recovered in the Settlement. Petrovic vs. Amoco Oil Company, 200 F.3d 1140,

1150 (8th Cir. 1999); Reynolds v. Beneficial National Bank, 288 F.3d 277 (7th Cir.

2002); Reed v. General Motors Corp., 703 F 2d 170, 172, (5th Cir. 1983); Ohio

2

Public Interest Campaign v. Fisher Foods. Inc., 546 F Supp. l, 5, (DC Ohio 1982).

III. Whether the Amount of Attorney’s Fees is Grossly Excessive. Blum

v. Stenson, 465 U.S. 886, 889-90, 104 S.Ct. 1541, 79 L.Ed. 891 (1984)

STATEMENT OF THE CASE AND FACTS

Intervenor/Objector/Appellant Carol Mackay (“Mackay”) adopts the

background information set forth in In re BankAmerica Corp. Securities

Litigation, 78 F.Supp.2d 976 (E.D. Missouri, 1999), pages 982 to 986, as her

statement of the facts and to the extent relevant, her statement of the case up to

that point in time. This court’s decision of the same name at 263 F.3d 795 and the

history of the case set forth in §IV of the notice, beginning on page 3, complete the

picture up to the proposed settlement. Mackay, as the executrix of her father’s

estate, filed her Preliminary Objections to the Proposed Settlement Agreement on

May 16, 2002. The Fairness Hearing on the proposed settlement agreement was

held on May 30, 2002 before the Honorable John F. Nangle. Mackay appeared

through counsel and urged the court to reject the proposed settlement (Tr. 132-

140). District Judge Nangle entered an Order approving the proposed settlement

agreement and the revised plan of allocation on September 30, 2002. The Order

approving attorneys’ fees was entered on October 15, 2002. Mackay timely filed

her Notice of Appeal on October 30, 2002.

3

SUMMARY OF ARGUMENT

I

The notice to the Class was misleading. For one, it misstates a material fact

in that it states that one of the class representatives is opposed to the settlement

when in fact all of the class representatives are opposed to the settlement. It also

gives the impression that the plaintiff class’ case is weak although the contrary is

true and the facts reflect a strong plaintiffs’ case. The misleading nature of the

notice renders it ineffective as a tool to inform absent class members about the

nature of the case in a way to make it sufficient for them to make a decision as to

whether to accept the settlement, object, or opt out.

II

The settlement is grossly inadequate. Although class members have

recoverage damages of $5.88 per share, under the settlement the recovery to class

members is either $0.34 or $0.22 per share. The plaintiffs’ case is exceptionally

strong in light of the SEC’s findings of falsity and scienter, which are the main

elements of the plaintiffs’ case.

The strength of the SEC’s findings suggest that plaintiffs were likely to

prevail on the merits. A $0.22 recovery against losses of $5.88 per share is plainly

inadequate where the SEC has already concluded that defendants made misleading

4

statements and were aware of the concealed information. At the Fairness Hearing,

Judge Nangle acknowledged that he thought Plaintiffs’ had a 50 to 66 2/3%

chance for recovery. Yet, the value of the settlement approved clearly does not

reflect anything like those percentages. As Reed Kathrein stated, “The lowest

numbers they have given us today . . . is 2.6 billion for NationsBank. If you give

40 percent of that, you are still over one billion dollars.”

III

The settlement provides a recovery of only 4% of recoverable damages.

The settlement is out of line with similar settlements in securities fraud cases. In

cases where a low percentage recovery has been approved, a number of factors are

usually present, including a) insolvency of defendant, b) weakness of Plaintiffs'

case either based on theory or proof or availability of defenses and/or c) the

absence of objections to the settlement. This case involves a strong plaintiffs’

case, a solvent defendant, and objections by all of the class representatives. In

securities cases where these factors are present, the percentage of recovery is

typically much higher than in the instant case.

IV

The amount of attorneys’ fees awarded, 18% of the total recovery, is grossly

excessive, considering the strength of the case and the low percentage of recovery.

5

The attorneys’ fees amount is approximately three times the lodestar. The U.S.

Supreme Court has established a strong presumption that the unenhanced lodestar

is the reasonable statutory fee. The facts do not support such a departure from the

lodestar.

ARGUMENT

I. The notice to the class was misleading because important materialinformation was omitted from the Notice.

The court views notice to the class de novo to determine whether notice

meets the requirements of constitutional due process.

On page six of the notice to the class (hereinafter Notice) it states:

David P. Oetting, a lead plaintiff and one of the classrepresentatives for the NationsBank Holder Class, hasindicated that he plans to object to the settlement on theground that the amount to be paid to the NationsBankClasses is inadequate, both as a percentage of thesettlement amount and in absolute terms.

The statement was misleading because class counsel and defendants knew that

neither Mackay nor any other stockholder was given the opportunity to consider

the repudiation of the proposed settlement by all the NationsBanks class

representatives. In fact, all of the NationsBank class representatives were opposed

to the settlement. The omission of this somewhat basic information is at best

misleading. The omission clearly renders the Notice ineffective in providing class

6

members with the basic information necessary for them to make an informed

decision as to whether to accept or reject the proposed settlement. Information

provided by notice to class members must be so structured that class members are

rationally able to decide whether they should intervene in the settlement

proceedings or otherwise make their views known. Petrovic, et. al. vs. Amoco Oil

Company, 200 F.3d 1140, 1151 (8th Cir. 1999); Reynolds vs. National Football

League, 584 F.2d 280, 285 (8th Cir. 1978). The omission in the notice of the fact

that all of the NationsBank class representatives had repudiated the settlement was

compounded by the failure of the Notice to disclose that the hundreds of millions

of dollars in potential damages were being released without payment of damages

as consideration and, that there was the gross disparity between the actual

recovery of $0.22 and $0.34 per share before fees and the potential recovery of up

to $5.88 per share.

Omission of material facts in a notice of proposed settlement is grounds for

reversal of a District Court’s Order approving that settlement. In National Super

Spuds, Inc. v. New York Mercantile Exchange, 660 F.2d 9, 31 (2d Cir. 1981), the

Second Circuit reversed approval of a settlement where the notice did not apprize

the class, consisting of members with both liquidated and unliquidated contract

claims, that unliquidated claims would be settled without compensation while

7

releasing the defendant from liability from all claims. Because only the class

members with liquidated claims would benefit, the Second Circuit found the

omission of that key fact in the notice to be fatally defective.

Here, the class notice goes beyond mere omission, actually containing

misinformation which states that only one NationsBank class representative

objected to the settlement when, in fact, all the NationsBank class representatives

objected. This misinformation violates process due under a class action notice of

proposed settlement because it makes it impossible for absent class members to

make an informed decision whether to approve, object to or to opt out of the

proposed settlement.

II. The Settlement should not have been approved as fair and adequatebecause the strength of plaintiffs’ case far outweighs the amountrecovered in the Settlement.

The standard of review for this issue is abuse of discretion.

The most important consideration in determining the fairness and adequacy

of a class action settlement is the strength of the case for the plaintiffs on the

merits, balanced against the amount offered in settlement. Petrovic vs. Amoco Oil

Company, 200 F.3d 1140, 1150 (8th Cir. 1999).

The Seventh Circuit’s recent decision in Reynolds v. Beneficial National

Bank, 288 F.3d 277 (7th Cir. 2002) supplies a useful analysis regarding settlement

8

value. The Court wrote in part:

A high degree of precision cannot be expected in valuinga litigation, especially regarding the estimation of theprobability of particular outcomes. Still, much more couldhave been done here without (what is obviously to beavoided) turning the fairness hearing into a trial of themerits. For example, the judge could have insisted that theparties present evidence that would enable four possibleoutcomes to be estimated: call them high, medium, low,and zero. High might be in the billions of dollars, mediumin the hundreds of millions, low in the tens of millions. Some approximate range of percentages, reflecting theprobability of obtaining each of these outcomes in a trial(more likely a series of trials), might be estimated, and soa ballpark valuation derived.

Some arbitrary figures will indicate the nature of theanalysis that we are envisaging. Suppose a high recoverywere estimated at $5 billion, medium at $200 million, lowat $10 million. Suppose the midpoint of the percentageestimates for the probability of victory at trial was .5percent for the high, 20 percent for the medium, and 30percent for the low (and thus 49.5 percent for zero). Thenthe net expected value of the litigation, before discounting,would be $68 million;discounting, depending on anestimate of the likely duration of the litigation, would bringthis figure down, though probably not to $25 million--andany discounting might be inappropriate, as we explained.These figures are arbitrary; our point is only that the judgemade no effort to translate his intuitions about the strengthof the plaintiffs' case, the range of possible damages, andthe likely duration of the litigation if it was not settled nowinto numbers that would permit a responsible evaluation ofthe reasonableness of the settlement.

Reynolds, 285. It is also noteworthy that the Court decided in Reynolds that

1Meager is of course reflective. A young lawyer with a client with a strong case who hasbeen damaged to the tune of $588,000, who nevertheless proposed settling for $29,000, isproposing recovery of a meager value. Just because the numbers in this matter are larger doesnot make a 5% recovery adequate.

9

Circuit Rule 36 would apply on remand. Seventh Circuit Rule 36, entitled

Reassignment of Remanded Cases, provides:

Whenever a case tried in a district court is remandedby this court for a new trial, it shall be reassigned by thedistrict court for trial before a judge other than the judgewho heard the prior trial unless the remand order directs orall parties request that the same judge retry the case. Inappeals which are not subject to this rule by its terms, thiscourt may nevertheless direct in its opinion or order thatthis rule shall apply on remand.

Applying the Seventh Circuit’s Reynolds analysis to this case can only

result in the conclusion that the settlement should have been rejected by Judge

Nangle. No reasonable discount rate exists to bridge the gap between the net

expected value of this litigation and the meager1 value of this settlement.

Mackay’s counsel at the fairness hearing, attorney N. Albert Bacharach, Jr.,

(Tr. 132-140) argued to the Court:

1. That a Reynolds analysis applied to the agreed settlement rangeof roughly, $.50 to $2.00 per share results in a settlement valuein the neighborhood of $.50 per share;

2. That the “old” BankAmerica was falsely representing thenature of its relationship with D. E. Shaw in its SEC filings in1998 and 1999 by delineating them as loans when, in fact, the

10

bank was in an equity situation with Shaw; and

3. That the defendants clearly had the ability to pay appropriatedamages in this matter. That the BankAmerica 10K forDecember 2001 shows: $622 billion in assets; $3.5 billion in“revenue;” and a net on that of $6.8 billion.

Pursuant to Mr. Bacharach’s analysis: the $490 million settlement found

adequate in this matter by Judge Nangle clearly is not; that fairness and adequacy

would require the defendants to pay at least $980 million; that there is a

compelling case to be made that the “old” BankAmerica actions constitute fraud;

and that the defendant’s assets and revenue should have precluded class counsel

from discounting the value of the settlement because there was no risk of

nonpayment of damages.

At the fairness hearing, Judge Nangle acknowledged that he thought

plaintiffs’ percentage chances for recovery ranged between “50 and 66-2/3.”

Transcript 190, 197. As Attorney Reed R. Kathrein of Milberg, Weiss, Bershad,

Hynes and Lerach, LLP, one of the attorneys for Intervenors Gumapas, Sorkin,

and Shyken, stated at the hearing, “The lowest number they have given us today –

and that’s excluding the merger of equals – is 2.6 billion for the Nationsbank. If

you give 40 percent of that you’re still over one billion dollars . . . something in

the magnitude of . . . 600 million or 800 million for the Bank of America class,

2On July 30, 2001, the Securities and Exchange Commission ("SEC") concluded anextensive investigation of defendants' misconduct. The investigation resulted in acease-and-desist order ("SEC Order"). In the order, the SEC has already found thatBankAmerica made "materially misleading" statements during the class period, failed toconform to Generally Accepted Accounting Principles (“GAAP") and "was aware on anongoing basis" of the risk of the D. E. Shaw relationship, i.e., that BankAmerica was aware ofthe concealed information. SEC Order at 4-5, 7. In other words, the SEC has already determinedthat substantial evidence exists to demonstrate falsity and scienter, the principal elements ofplaintiffs' claims.

3One need only look at the severance package given to CEO David Coulter as part of themerger. Mr. Coulter alone received a reported approximately One Hundred Million Dollars($100,000,000) or one-third (1/3) of what the roughly 160,000 NationsBank shareholderstogether will share under the proposed settlement. See Exhibit A attached hereto andincorporated by reference.

4The attorneys' comments are borne out by the recent settlement of a case with similartheories of this one. In a case against Bank of America the Plaintiffs' settlement was 100 cents on

11

just based on the proportions.” Transcript 189 - 190. That’s a heck of a yawn

from the settlement amounts of $333.2 million and $156.8 million, respectively.

Additionally, on the issue of fair and adequate value this Court should also

note: (a) The trial court had denied defendants' Motion for Summary Judgment as

to the NationsBank classes; (b) The defendants had entered into a July 30, 2001

Consent Decree with the Securities and Exchange Commission following the

commission’s investigation of the “old” BankAmerica violations;2 (c) The

potential recovery according to plaintiffs’ expert was $7.5 billion; (d) The

defendant is strong and solvent3; and, (e) Prior to reaching the settlement in this

matter, plaintiffs' attorneys had repeatedly commented about the strength of the

case.4

the dollar as opposed to 5 cents on the dollar here. See Exhibit B attached hereto andincorporated by reference.

Additionally, the proposed settlement was reached close in time to the scheduled trialdate of April 8, 2002. Many rulings of the Court had been made previously and the Courtindicated on March 15, 2002 that, at the time of the mediation, it was about to issue certain otherrulings which would have affected the mediation. All of these factors would have affected theoutcome of the mediation and the Court's rulings thus far would be characterized as favorable tothe Nationsbank Classes.

The notion that the settlement was "strong-armed" is supported by the fact that the Bankhad decided what it was going to pay at least a month before the mediation ) and that's what theypaid ) Three Hundred Thirty-Four Million Dollars ($334,000,000). This amount, it was revealed,was the amount the Bank had charged to earnings and taken as a reserve in the fourth quarter of2001. There was no negotiation or change of position on the Bank's part. The only apparentnegotiation was between the Bank and the insurance company. After that was established, theonly discussion left was to divvy the already inadequate amount between Mr. Abbey's clients andMr. Green's clients.

12

In deciding whether to approve a proposed settlement, the Court is not

called upon to conduct a mini-trial on the merits of the case. Reed v. General

Motors Corp., 703 F 2d 170, 172, (5th Cir. 1983); Ohio Public Interest Campaign

v. Fisher Foods. Inc., 546 F Supp. l, 5, (DC Ohio 1982). However, in this case, a

mini-trial to a great extent has already occurred. The Securities and Exchange

Commission had made significant determinations and rulings. While the SEC

determination may not be directly admitted in evidence in a jury trial, it cannot be

ignored in the context of settlement. It serves as a reasonable milepost on the issue

of liability for the NationsBank Classes.

The SEC’s findings strongly suggested that plaintiffs had a strong

13

likelihood of prevailing on the merits. A $0.22 recovery against losses of $5.88

per share is patently inadequate in this context wherein the SEC has already

concluded that defendants made misleading statements and were aware of the

concealed information. This settlement clearly fails to pass the fairness and

adequacy standards discussed by the Eighth Circuit in Grunin v. Int’l House of

Pancakes, 513 F.2d 114, 120 (8th Cir. 1975), and the Seventh Circuit in Reynolds

v. Beneficial National Bank, 288 F.3d 277 (7th Cir. 2002).

This woefully inadequate settlement of $490 million (which amounts to

only 4% of the maximum recovery value of plaintiffs’ claims) was established by

defendant as a reserve for the settlement a month before mediation.

IIa. Other Settlements:

The sub-set of class actions involving securities, in which settlements have

been approved, can be further distinguished by whether they are a high percentage

settlement or a low percentage settlement. In cases where there is a low percentage

settlement, a number of factors typically are present: a) an insolvency of

defendant; b) weakness of plaintiffs' case either based on theory or proof or

availability of defenses; and/or c) the absence of objections to the settlement.

Examples of these include: In Re: Mego Financial Corp. Securities Litigation, 213

F3d 454, 458-459 (9th Cir. 2000) (16.7%); Lyons v. Scitex Corp., 987 F. Supp.

14

271, 277 (DCNY 1997) (6-11%); Behrens v. Wometco Enterprises, Inc., 118 FRD

534, 538-539 (DCFL 1988) (57%); Feinberg v. Aiberilia Corp., 966 F. Supp. 442,

444 (DCLA 1997).

On the other hand, when such factors are not present, the settlements are not

so low. Examples of these include: In Re McDonnell Douglas Equipment Leasing

Securities Litigation, 838 F. Supp. 729, 737-738 (DCNY 1993) (50%); In Re

Bausch & Lomg., Inc. Securities Litigation, 183 ERD 78, 81-82 (DCNY 1998)

(42%); In re Cendant Corp. Securities Litigation, 109 F. Supp. 3d 235, 255-262

(DCNY 2000) (37%); Slade v. Shearson Hammill Co., Inc. 79 FRD 309, 313

(DCNY 1978) (75% and 30%); and Lowenschuss v. C.G. Bluhdorn, 82 FRD 712,

715-716 (DCNY 1979) (51-63%).

In this matter it is clear that the Court approved as fair and adequate a low

percentage settlement even though none of the low settlement factors set forth

above were present.

III. The Amount of Attorney’s Fees is Grossly Excessive

The standard of review for this issue is abuse of discretion.

The district court below awarded fees of 18% to counsel for both the

NationsBank and BankAmerica classes on a settlement of $490 million. Mackay

has shown the settlement amount is grossly inadequate in light of the strength of

5As Mackay has previously shown, the low end of a fair and adequate settlement in thismatter is over $980 million. In a common fund case such as this, it is only equitable to pay thelawyers $0.50 on the dollar since they were willing to take $0.50 on the dollar on behalf of theclass members. Under the circumstances, 9% is more than adequate.

15

the case and the potential recovery. Yet the maximum attorneys’ fees to the

NationsBank classes is $83.3 million, and the maximum total attorneys’ fees to be

paid to the BankAmerica classes is $39.2 million, neither of which reflect the

adequacy of the settlement.5 Additionally, the U.S. Supreme Court has established

a strong presumption that the unenhanced lodestar is the reasonable statutory fee.

Blum v. Stenson, 465 U.S. 886, 889-90, 104 S.Ct. 1541, 79 L.Ed. 891 (1984). The

award of 18% of the common fund is more than three times the lodestar. In light of

the inadequacy of the settlement, the fee award is clearly excessive.

IV. Adoption of other arguments

Appellant Mackay adopts the arguments of appellants’ Koehler and Oetting

with regard to all issues arising under the Private Securities Litigation Reform Act

(PSLRA) as if set forth fully herein.

CONCLUSION

For the foregoing reasons, Appellant Mackay, a member of the NationsBank

Classes, requests that this Court reverse the District Court’s Orders approving the

proposed settlement and granting attorneys’ fees, and remand for further

16

proceedings before a new district judge.

CERTIFICATE OF COMPLIANCE

I certify that pursuant to Fed. R. App. P. 32(a)(7)(C) and Eighth Circuit

Rule 28A(c), the attached initial brief is proportionately spaced, has a typeface of

14 points or more and contains 4,939 words. The brief was prepared using

WordPerfect 10.

DATED: January 15, 2003

CERTIFICATE OF SERVICE

The undersigned certifies that a true and complete copy of the foregoingwas served by mailing the same by the U.S. Mail, first-class postage prepaid, this16th day of January, 2003, to each counsel of record at the addresses of recordnoted below:

Mitchell A. MargoCurtis Oetting Heinz Garrett & Soule,P.C.130 South Bemiston, Suite 200Clayton, MO 63105Fax: (314) 725-8789Counsel for appellants Koehler andOetting

Martin M. GreenJonathan F. AndresJoe D. JacobsonGreen, Schaff & Jacobson, P.C.7733 Forsyth Boulevard, Suite 700

Clayton, MO 63105Fax: (314) 862-1606Liaison Counsel and Lead Counselfor the NationsBank Classes

Arthur N. AbbeyAbbey Gardy, LLP212 East 39th StreetNew York, NY 10016Fax: (212) 684-5191Counsel for plaintiffs-appelleesBankAmerica Classes

17

Warren R. SternWachtell Lipton Rosen & Katz51 West 52nd StreetNew York, NY 10019-6150Fax: (212) 403-2000Counsel for defendants-appelleesBank of America Corp., et al.

John Michael ClearBryan Cave, L.L.P.211 North Broadway, Suite 3600St. Louis, MO 63102-2750Fax: (314) 259-2020Counsel for defendants-appelleesBank of America Corp., et al.

Ronald L. OlsonMunger, Tolles & Olson, LLP355 S. Grand Avenue, 35th FloorLos Angeles, CA 90071Fax: (213) 687-3702Counsel for defendants-appelleesCoulter, Higgins, and O’Neill

Barry A. ShortLewis Rice & Fingersh500 North Broadway, Suite 2000St. Louis, MO 63102Fax: (314) 241-6056Counsel for defendants-appelleesCoulter, O’Neill, and Higgins

Edward W. Cochran, Esq.OH Bar No. 00329422872 Broxton RoadShaker Heights OH 44120Telephone: (216) 751-5546Facsimile: (216) 751-6630

Respectfully submitted,

______________________________Frank H. Tomlinson, Esq.AL Bar No. ASB-7042-T66FPritchard, McCall & Jones, LLC505 N. 20th Street, Suite 800Birmingham, AL 35203Telephone: (205) 328-9190Facsimile: (205) 458-0035

N. Albert Bacharach, Jr.Florida Bar Number: 209783115 Northeast 6th AvenueGainesville, Florida 32601Telephone: (352) 378-9859Facsimile: (352) 338-1858

18

Paul S. RothsteinFlorida Bar Number: 310123626 NE 1st StreetGainesville, FL 32601Telephone: (352) 376-7650Facsimile: (352) 374-7133

Attorneys for Appellant Mackay