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December 15, 1995


The opinion of the court was delivered by: LANGFORD

 Plaintiffs' counsel's application for costs and expenses was referred to this Court for findings and recommendations by order of the District Court (Hon. Eugene F. Lynch). Plaintiffs' counsel filed this application for costs and expenses incurred to date and for reservation of partial settlement proceeds for costs and expenses to be incurred in the future in connection with plaintiffs' claims against non-settling defendants *fn1" , dated June 29, 1995. The application is based on plaintiffs' counsel's Notice, Memorandum of Points and Authorities and Declarations of plaintiffs' attorneys. Plaintiffs' counsel's argument having been fully considered and for good cause appearing, this Court makes the following findings and recommendations:


 On or about March 24, 1994, eighteen actions have been filed in the United States District Court for the Northern District of California as class actions on behalf of persons who purchased Media Vision common stock and debentures during a defined period of time. The actions were consolidated as In re Media Vision Technology Securities Litigation, Master by Stipulation and Order filed May 17, 1994 (the "Class Action").

 The Operative complaint in this Litigation is the Second Amended Consolidated Complaint, filed on March 8, 1995 ("Complaint"). The Complaint asserts violations of Section 11, 12(2), and 15 of the Securities Act of 1933, Section 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder.

 On November 10, 1994, plaintiffs filed a motion for class certification. On November 29, 1994, the court approved a Stipulation and Order. Plaintiffs have designated five persons to serve as class representatives.

 A Stipulation of Settlement was entered into on September 22, 1995 (the "Stipulation"). The Stipulation was intended by the Settling Parties to fully resolve, discharge, and settle the Released Claim. The Settlement between the Settlement Class and the Settling Defendants and Media Vision's outside directors, the Settling Outside Directors, has created a Settlement Fund of $ 1 million for the benefit of the Settlement Class.

 Plaintiffs' counsel, comprised of at least fifty groups of plaintiffs' attorneys, have filed this application for reimbursement of costs and expenses to date, of approximately $ 797,161.89. Plaintiffs' counsel further request that the balance of the Fund be used as a "war chest" to fund the prosecution of the case against the non-settling defendants.


 "The foundation for the historic practice of granting reimbursement for the costs of litigation is part of the original authority of the chancellor to do equity in a particular situation." Mills v. Electric Auto-Lite Co., 396 U.S. 375, 392-3, 90 S. Ct. 616, 626, 24 L. Ed. 2d 593 (1970) (citing Sprague v. Ticonic Nat. Bank, 307 U.S. 161, 166, 59 S. Ct. 777, 780, 83 L. Ed. 1184 (1939)).

 The reimbursement of taxable expenses in federal litigation is governed by 28 U.S.C. § 1920 *fn2" and Fed.R.Civ.P. 54 *fn3" However, unlike the Fed.R.Civ.P. 54(d), which entitles prevailing parties to collect taxable costs, an attorney who has created a common fund has a right to reimbursement even if the litigation does not produce, or may never produce, an actual recovery. Id. at 392 Reasonable costs and expenses incurred by an attorney who creates or preserves a common fund are reimbursed proportionately by those class members who benefit by the settlement. See Herbert B. Newberg, Attorney Fee Awards (1986) § 2.19: "Costs Reimbursement in Common Fund Fee Determinations," at 69; Mills v. Electric Auto-Lite Co., 396 U.S. 375, 90 S. Ct. 616, 625-6, 24 L. Ed. 2d 593 (1970).

 However, the costs and expenses incurred by counsel are subject to a test of relevance and reasonableness in amount. The taxation of costs lies within the trial court's discretion. Thornberry v. Delta Air Lines, 676 F.2d 1240, 1245 (9th Cir. 1982), remanded on other grounds, 461 U.S. 952 (1983). The judge must look at the practical and reasonable needs of the party in the context of the litigation.

 A court assigned with the responsibility of reimbursement determination is reminded that it is generally not the practice of an attorney to bill a client for every expense incurred in connection with the litigation in question. The attorney is expected to absorb some of the cost of doing business as an attorney, and should not be allowed to shift the expense of overhead in running a legal practice to his or her client. An award of out-of-pocket expenses should be limited to those expenses customarily billed to a fee-paying client.

 Finally, this Court notes that although counsel is retained by a class as a legal advocate on its behalf, an inherent conflict of interest exists between counsel and the class. Naturally, the more that the court awards to counsel, the less is left for the class. The judge in charge of the expense reimbursement process faces a heavy burden to balance the need to reimburse counsel for all reasonable expenses and costs necessary for effective representation while, at the same time, protecting the interests of the class.


 In general, federal courts have denied expert fees beyond the statutory allowance under 28 U.S.C. § 1821. *fn4" However, since the Supreme Court indicated that Fed.R.Civ.P. 54 authorizes district courts to award costs not specifically enumerated in 28 U.S.C. § 1821, most jurisdictions have held that district courts have the discretion to reimburse consulting and expert witness fees. See Farmer v. Arabian American Oil Co., 379 U.S. 227, 85 S. Ct. 411, 13 L. Ed. 2d 248 (1964); Thornberry v. Delta Air Lines, 676 F.2d 1240, 1244 (9th Cir. 1982), remanded on other grounds, 461 U.S. 952 (1983).

 The discretion to award reimbursement for expert witness fees is not unlimited. In order for the district court to allow such expenses, the court must find that the expert testimony submitted was "crucial or indispensable" to the litigation at hand. United States v. City of Twin Falls, Idaho, 806 F.2d 862, 864 (9th Cir. 1986); Paschall v. Kansas City Star Co., 695 F.2d 322, 338 (8th Cir.1982) reversed on other grounds 727 F.2d 692 (1984). The district court should use its discretion sparingly, applying strict scrutiny in its decision to grant expert fees. Id. at 878.

 In the present case, plaintiffs' counsel has requested reimbursement for expert fees from a common fund. The expert witnesses have not had the opportunity to testify during a trial, as is typically the case when expert witness fees are awarded to the prevailing party. Such circumstances make it more difficult to assess whether the services provided by the experts were "crucial and indispensable" to the Settlement entered into by the settling parties.

 Particularly in question is the request made by the firm of Milberg, Weiss, Bershad, Hynes & Lerach for experts/ consultants/ investigator fees, totaling $ 195,812. Counsel has submitted, upon the request of this Court, additional documentation supporting the application for witness expenses. This Court does not doubt the necessity for counsel to retain expert assistance given the complexity of the litigation. However, it is the opinion of this Court that expert expenses should only be granted under the condition that the total amount of the expense request is reduced. Below is a description of the experts employed and the fees incurred.

 Princeton Venture Research, Inc.

 Plaintiffs' counsel request reimbursement in the amount of $ 91,724.91 for the expert services rendered by Princeton Venture Research, Inc. The securities and financial analysts retained provided financial analysis and investment banking and venture capital consulting. These analysts also provided counsel with their opinion on causation, materiality and damages.

 At this stage of the litigation, it is difficult for this Court to determine whether all of the services provided by Princeton Venture Research, Inc. were "crucial and indispensable" to the Settlement. Furthermore, a review of all the services rendered suggests that some of the services involved legal consulting, a function for which counsel was retained. It is the opinion of this Court that counsel should not be allowed reimbursement for retaining experts whose services, in some instances, duplicate the work assigned to counsel.

 For the following reason, this Court recommends a reduction in the expenses requested by 20% to reflect the percentage of work the Court feels was duplicated. *fn5"

 Forensic Accountants And Rossi, Webster & O'Brien

 Plaintiffs' counsel request reimbursement in the amount of $ 18,838.63 for expert services rendered by a certified public accountant firm, Rossi, Webster & O'Brien. This accountant firm provided audit, accounting, tax and forensic accounting services. At the same time, Plaintiffs' counsel has submitted a request for $ 82,526.25 for services rendered by three certified public accountants employed by the law firm, at the rate of $ 165.00 to $ ...

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