Jimmy Leas writes:

I filed the following response to IBM's and class counsel's pleadings
with the court today. [7 Aug 2005]
Jimmy

                 UNITED STATES DISTRICT COURT
                 SOUTHERN DISTRICT OF ILLINOIS


Kathi Cooper, et al.              )
                                  )
          Plaintiffs,             )
                                  )
vs.                               )    CIVIL NO. 99 829 GPM
                                  )
IBM Personal Pension Plan and     )
IBM Corporation,                  )
                                  )
          Defendants.             )


       RESPONSE TO "DEFENDANTS' MEMORANDUM IN SUPPORT OF
         PLAINTIFF'S MOTION FOR APPROVAL OF SETTLEMENT"
                              AND
RESPONSE TO "CLASS PLAINTIFFS' MOTION FOR FINAL APPROVAL OF CLASS
     ACTION SETTLEMENT WITH RESPECT TO SUBCLASSES 1 AND 2"
                              AND
  RESPONSE TO "MOTION FOR AWARD OF ATTORNEY'S FEES, COSTS, AND
                        INCENTIVE AWARDS

Retaliation
In two places IBM threatens retaliation against current employees if
the settlement agreement is not approved (page 3, 5th bullet and page
8 last sentence of the first paragraph). IBM's assertion that it would
further take away pensions if employees prevail in the suit is exactly
the kind of threat of retaliation that would chill employees from
objecting to the settlement agreement.

Even before IBM threatened members of the class with further
diminishing their pensions, class counsel stifled opposition by
raising a similar threat of retaliation in Q and A dated June 21, 2005
that class counsel posted on the web: "In this context it is important
to note that even if Chief Judge Murphy had agreed to the remedy
requested by the Class and even if that remedy was affirmed on appeal,
there are a variety of ways IBM could have dramatically reduced the
benefits that would actually be paid to the Class members by bllions
of dollars by further amending the Plan following the completion of
the litigation" (attachment 3 of my objection, paragraph #6).
Class counsel repeated the threat in its July 1 letter to me
attachment 6 of my objection) that was posted on web sites, and in its
August 2, 2005 brief to this court on page 4, second paragraph, on
page 15, paragraph #20, and on page 19, paragraph #23.

Fair, reasonable, and adequate
IBM and class counsel failed to dispute most of the points in my
objection. I would respectfully ask the court to now consider those
points as undisputed and accepted as binding facts in the court's
consideration of whether the settlement agreement is fair, reasonable,
and adequate.

1. IBM and class counsel did not dispute that Judge Murphy in his July
31, 2003 order denying IBM's motions and accepting the plaintiff's
motions, stated that older plaintiffs lost 47% of their pensions to
the cash balance plan.

2. Nor did IBM and class counsel dispute that those with 15 to 20
years of service each lost hundreds of thousands of dollars. In
particular, IBM and class counsel did not dispute that IBM's
and class counsel's own briefs responding to the court's request for
proposed remedies acknowledged as much: IBM stated that the remedy
proposed by class counsel would "produce an increase worth $215,500
under one approach or $308,900 under the other."

3. Nor did IBM and class counsel dispute that under the first phase of
the settlement agreement these members of the class will recover a
total value averaging only about $1,114, which is about one half of
one percent of the losses admitted by IBM and class counsel.

4. Nor did IBM and class counsel dispute that if all appeals are won,
these plaintiffs will receive an additional total value averaging only
about $5,116, adding about 2 1/2 % of the admitted losses for a total
recovery of about 3% of the losses.

5. Nor did IBM and class counsel dispute that IBM recognized the kind
of remedy that should be provided as one which would put "plan
participants, as nearly as possible, in the position that they would
have occupied if the violations had not occurred in the first place"
(IBM's December 5, 2003 brief, page 10).

6. Nor did class counsel dispute that class counsel had filed a brief
concerning remedy urging the court to "order IBM, the Plan sponsor, to
provide all Plan persons who were participants on July 1, 1999 with a
choice between the revised cash balance benefits and the revised PCF
benefits" (The Class's Submission for Entry of Remedial Relief, Doc.
No. 201, filed October 15, 2003, page 11, item 19). In his August 2,
2005 filing, class counsel now rejects his own previous argument to
this court. Class counsel now joins IBM in asking the court to provide
275,000 people who lost about half their pensions with a settlement
that accepts 99.5% of that loss, that rejects providing a choice of
pension plans, and that permits IBM to keep all but a tiny fraction of
what IBM stole in its illegal action.

7. Nor did IBM and class counsel dispute that nothing in the July 31,
2003 court decision is consistent with the view that a fair,
reasonable, and adequate settlement would provide IBMers with only a
tiny sliver of what IBM illegally stole. Nor is it consistent with
allowing IBM to retain most of the benefit of its illegal pension
snatching.

8. Nor did IBM and class counsel dispute that while a court may reform
a contract, there is no reforming an illegal act, particularly, where
as here, the court stated in its July 31, 2003 decision that IBM
engaged in its illegal action "with open eyes." Class counsel now
joins IBM in arguing that since only a portion of what IBM did was
illegal class members should expect to recover only the portion of
IBM's action that was illegal. In essence this means that class
counsel and IBM made their settlement agreement based on the view that
the court would reform IBM's illegal action rather than simply telling
IBM to provide all employees with a choice between the pension plans.
Neither provides any support for this position.

9. Nor did IBM and class counsel find any basis to dispute that if the
transaction involved illegality the entire transaction was illegal.

10. Nor did IBM and class counsel dispute the public policy argument
that if the court were to accept the position of IBM and class counsel
that the remedy provided by the court would merely revise IBM's 1995
and 1999 plans so as to avoid the illegality while allowing the sharp
reduction in pensions to be maintained, no future corporate criminal
would worry about acting outside the constraints of law. If the
penalty would only be a minor adjustment to bring all portions of its
crime within the law corporate disregard for the law would sharply
escalate.

The settlement agreement gives the attorneys too much of the money
provided to the class Nor did IBM and class counsel dispute that under
the settlement agreement, despite the pitifully inadequate individual
return each member of the class receives, the attorney fee provided in
the settlement agreement amounts to $88.5 million under its first
phase, $269.7 million if the class wins one appeal, and $381.3 million
if the class wins both appeals.

Nor did class counsel dispute that the huge attorney fee relies
heavily on their being a large number of members in the two
subclasses, totaling 275,000 persons, rather than the settlement
providing a fair, reasonable and adequate amount for each class
member. Class counsel totally relies on arguing that the fee is
reasonable considering the total recovery for the class as a whole.
However, even that argument fails when considered in light of the case
class counsel cites as controlling, In re Synthroid Marketing Litig.,
264 F. 3d 712 (7th Cir. 2001), as described below.

Nor did IBM and class counsel dispute that the attorney fee is out of
line with mean or median attorney fees in other class action cases
with comparable total recovery, as shown by the report, "Attorney Fees
in Class Action Settlements: an Empirical Study," by Theodore
Eisenberg and Geoffrey P. Miller, professors of law at Cornell Law
School and NYU, respectively that is available at
http://w4.stern.nyu.edu/emplibrary/03-017.pdf. Class counsel resorts
to arguing that they are entitled to a premium of 1 1/2 standard
deviations above the median, which they acknowledge is 12%. However, I
would respectfully ask the court to consider that having
accepted a total value averaging $1114 per employee for a case they
and IBM acknowledged valuing at between $215,000 and $308,900 for each
employee, they are not actually entitled even to the median.

Nor did IBM and class counsel dispute that the Eisenberg-Miller report
showing that the contingency fee percentage declines as the recovery
increases.

Nor did IBM and class counsel dispute that the settlement agreement
reached between IBM and the class attorneys would give the class
attorneys a contingency fee that is even higher than the highest on
the Eisenberg-Miller chart for settlements at the $300 million level.

Nor did IBM and class counsel dispute that the contingency fee
percentage decided by Chief Judge Murphy regarding the Subclass 3
settlement of 30% for a recovery in the range of only $20 million,
placed that contingency fee percentage almost exactly on the best fit
line for that size recovery in Figure 4 of the Eisenberg-Miller
report. This lower level of recovery, in the millions or in the tens
of millions of dollars, is about the same as the levels of recovery in
cases reported Jeffrey Lewis's affidavit, in which he reports his firm
received a fee of about 25%, and is much lower than the recovery in
the present case.

Nor did IBM and class counsel dispute that the Eisenberg-Miller report
states that "We find that the level of client recovery is by far the
most important determinant of the attorneys' fee amount. A scaling
effect exists, with fees constituting a lower percent of the client's
recovery as the client's recovery increases."

Nor did class counsel dispute that the class attorneys breached their
implied promise to the class that they would answer questions posed by
class members about the settlement agreement. Instead they answered
questions they posed themselves.


Response to points made by IBM and Class Counsel
Both IBM and class counsel state that courts prefer settlement.
However, under the rule, not any settlement. The settlement must be
fair, reasonable and adequate.

Quoting the Isby decision, IBM acknowledges that factors to consider
are "the strength of plaintiffs' case compared to the amount of
defendants' settlement offer, an assessment of the likely complexity,
length and expense of the litigation, an evaluation of the amount of
opposition to settlement among affected parties, the opinion of
competent counsel, and the stage of the proceedings and the amount of
discovery completed at the time of settlement" (Isby v. Bayh, 75
F.3d 1191, 7th Cir. 1996).

As to the first point, concerning "strength of case," IBM omits
mention that the plaintiffs won the liability portion of the case. The
judge declared that IBM made its decision to engage in illegal
action with open eyes. Thus, the case is very strong.

As to the second point, concerning "assessment of the likely
complexity, length and expense of the litigation," again, IBM omits
mention that the plaintiffs won the liability portion of the case
at summary judgment. Although class counsel now argue that the remedy
portion is expected to be complex, class counsel omits mention that
the remedy it proposed providing all employees with a choice of
pension plans is actually eminently simple. In fact in his affidavit,
dated August 2, 2005, class counsel William K. Carr states that on
September 17, 1999 IBM already implemented exactly such a remedy by
"reducing the cutoff from age 50 and 10 years of service to age 40 and
10 years of service." Having already extended choice to 35,000 members
of the class, IBM has demonstrated that extending choice is a
practical and doable remedy. It can therefore be extended to all
members of the class without complex litigation. Even without any
of the complexity of the settlement agreement.

As to the third point, "an evaluation of the amount of opposition to
settlement among affected parties," IBM states that the number of
members of the class who submitted objections is a small percentage of
the class. Although this is true, I would ask the court to consider
that class counsel stifled opposition by raising the threat that if we
prevailed on remedy IBM would slash pensions again.

Furthermore, although class counsel notes that my objection was posted
to email lists and web sites, class counsel fails to note that I first
posted the objection on Thursday, July 7 leaving only those able to
respond immediately using overnight mail to get their objection to the
court in time for the Monday, July 11 deadline. Given that tight
schedule, and the fact that the membership of all the web sites
combined total about 6000, of which only a fraction likely view
postings each day, the fact that as many as 32 signed on and submitted
in time to meet the deadline is remarkable.

Furthermore, class counsel failed to answer questions I posed
(attachments #1 and #4 of may objection), leaving IBM employees in the
dark as to the value of the settlement agreement compared to their
losses.

Thus, the low percentage of objections is in part the result of
actions taken by Class counsel to stifle opposition. Furthermore, it
is worth noting that class counsel has only two class members
submitting affidavits supporting the settlement agreement. It is worth
noting that over twenty times as many wrote to demonstrate opposition
as signed affidavits indicating support.

As to the fourth point, "the opinion of competent counsel," I would
urge the court to consider that the plaintiffs' attorney have 88.5
million reasons for supporting the settlement agreement, and their
opinion is tainted with that personal interest.

As to the fifth and final point, "the stage of the proceedings and the
amount of discovery completed at the time of settlement," I would urge
the court to consider that the liability phase of the case is over and
IBM was convicted of illegal age discrimination. The judge went
further, declaring that IBM made its decision to act illegally with
open eyes. In view of the victory on liability there is no basis for
plaintiffs or the court to conclude that a settlement agreement that
provides plaintiffs with only one half cent on the dollar, and up to 2
" more cents at risk if they win appeals, is fair, reasonable and
adequate. Nor is there basis to conclude that a settlement
agreement that allows IBM to keep 99.5 cents of every dollar they
stole is fair, reasonable, and adequate under the tests provided in
the Isby case cited by IBM and class counsel.

IBM then states that other district courts rejected plaintiffs
liability arguments in other cases with other plaintiffs and other
defendants. But in this case, with this defendant who broke the law
with open eyes, IBM's defense was properly rejected, and IBM was
convicted of knowing age discrimination. IBM then cites other cases
with other facts and circumstances. I would urge the court to reject
these irrelevant arguments.

The crucial fact is that the amount of money each plaintiff gets from
the settlement agreement is extremely low compared to the admitted
losses suffered. The other crucial fact is that plaintiffs won in the
district court on liability. The probability of the district court
decision being affirmed on appeal is much higher than the fraction of
losses achieved in the settlement agreement. The amount at risk to
each plaintiff from rejecting the settlement agreement is low compared
to the acknowledged losses from accepting this settlement agreement.
Thus, the settlement agreement is not reasonable, fair, and adequate.
Furthermore, the settlement agreement does not actually meet
the test of being a settlement agreement that settles all issues
since, under the agreement, the courts still must hear the appeal, and
plaintiffs are still exposed to the risk of the appeal on all
issues except the base amount.

IBM then argues that the settlement was reached after hard-fought
litigation and bona fide settlement negotiations. I raise no dispute
concerning the litigation portion of this statement, nor do I dispute
the skill the attorneys exercised during that portion of the case. But
IBM has put forward no evidence concerning the settlement negotiations
portion. The number of meetings and the length of the meetings, if
true, does not say anything about how bona fide were the negotiations
on behalf of the members of the class during those meetings.

IBM then argues that class council unanimously agreed that the
settlement is fair, reasonable and adequate. I would ask the court to
consider that the class counsel has a very large personal stake
and that their opinion in this matter is tainted with that personal
interest.

Controlling precedent on the Attorney Fee
Class counsel states that "controlling precedent in this Circuit is In
re Synthroid Marketing Litig.,264 F. 3d 712 (7th Cir. 2001)" (Motion
for award of attorneys' fees, costs and incentive awards, p. 4).
However, I would urge the court to consider that this decision appears
only to prohibit a fixed cap. It favorably cites two cases that
provided rapidly diminishing contingency fee percentages as the size
of the award increases: "30% of the first million, 25% of the next 4
million, then 20% of the next $10 million, and 15% of everything above
$15 million" in one, Oracle Securities Litigation, 132 F.R.D. 538
(N.D. Cal. 1990). "Providing 17% of first $5 million, 12% of next $10
million, etc" in the other, In re Bank One Shareholders Class Actions,
96 F. Supp. 2d 780 (N.D. Ill. 2000).

Based on the trends in either of these cases, the contingency fee
percentage would be expected to decline to well under 10% for recovery
over $100 million. A rapidly declining contingency fee percentage
would therefore meet the strong approval of the 7th Circuit.

Conclusion
IBM was essentially convicted of engaging in illegal age
discrimination by this court. And the court noted that IBM did so with
open eyes as to the litigation that was sure to come. IBM should
not be permitted to negotiate its way out of substantially
compensating its victims by paying only enough to satisfy class
counsel at an approximately 25% rate. The class attorneys took
advantage of the large number of plaintiffs to provide a settlement
agreement that sells out their client's interest for a minimum price
of $88.5 million while IBM got to keep up to 99.5 cents on each
dollar it stole from its employees' pensions. IBM and class counsel
have failed to demonstrated that the settlement agreement is fair,
reasonable and adequate.

Nor should IBM be permitted to threaten its victims with retaliation.
The settlement agreement is seriously flawed, as described in my July
7 objection, but now in addition it is tainted with IBM's threat of
illegal retaliation. I respectfully ask the court to reject this
settlement agreement not just because it fails to meet the requirement
of being fair, reasonable, and adequate, but also so that members of
the class can consider this issue.

IBM employees--whose return is as little as one half cent on the
dollar according to IBM and class counsel's own numbers--are the big
losers, and they have every reason to be discouraged and dismayed and
to turn their backs on this litigation in disgust. Having suffered
devastating losses when they are old and most in need and having been
deceived first by IBM and now sold out by their own class attorneys
who seek to use the case to enrich themselves at their clients'
expense, and having been threatened with further cuts in pensions by
both IBM and the class counsel, they cannot be blamed for simply
withdrawing until they better understand what is going on. That could
not be accomplished in the 6 weeks before the July 11 deadline for
objecting.

Having argued to this court that choice of pension plans is an
appropriate remedy, I would ask the court to consider that class
counsel should not be allowed to argue the opposite or tell class
members the opposite now.

From a public policy point of view I would ask the court to consider
that where the number of plaintiffs in a class is exceptionally large,
as in this case, attorneys should not be allowed to receive huge
payments by multiplying an unreasonably small recovery for each person
by the large number of class members and multiplying that by a fat
contingency fee.

The system desired by class counsel is inherently corrupting. The
starting point for negotiations with the defendant could well be the
desired attorney fee, and the total recovery is found by dividing that
number by the expected contingency fee percentage. The class members
each then get that total divided by the number of members in the
class. This system destroys incentive and participation by plaintiffs
where a large number of persons were injured. The system places an
unreasonable burden on an honest attorney.

The court should protect the recovery of the individual member of the
class from such corruption by providing a scaled contingency fee
percentage, as recommended by the 7th Circuit in the Synthroid case
cited as controlling by class counsel. Such a scheme lifts the burden
on attorneys as well as better providing for a fair, reasonable and
adequate recovery for members of the class.

Furthermore, the Synthroid case holds only that a fixed cap is
prohibited. Synthroid favorably cites cases that provide a rapidly
declining contingency fee percentage to 12 to 15% for recoveries in
the $15 million range. Thus, for a case involving a recovery of $300
million the contingency fee percentage could decline in steps reaching
a much lower percentage than requested by class counsel, particularly
in view of the extremely low recovery for each individual member of
the class.

For all the above reasons, I respectfully request that this court to
reject this settlement agreement. I also request that the attorneys'
fee be slashed or eliminated. I also request that none of these
attorneys should be allowed to represent the class in any further
proceedings.

                         Respectfully submitted,



                         James Marc Leas
                         Attorney at Law
                         Vermont Registration Number 3371
                         PTO Registration Number 34,372
                         802 864-1575

Law Office of James M. Leas
37 Butler Drive
S. Burlington, Vermont 05403

cc Douglas R. Sprong, Korein Tillery, LLC, PO Box 4310, Fairview
Heights, IL 62208
Jeffrey G Huvelle, Covington & Burling, 1201 Pennsylvania Avenue, NW,
Washington, DC

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