Populus Law LLC

By Nick Boebel

Class Action Fees

Show Me The Money!

Show Me The Money!

Three Ways to Know Class Action Attorneys are Being Overpaid

Class actions are a critical tool to promote fair business practices.  Really, they are.  Without the class action, entire industries could freely rip off consumers a few dollars at a time.  A dollar here, a dollar there, in a country of more than 300 million, pretty soon you’re talking about real money. 

But there’s a problem.  In class actions, there’s no hiring client.  Nobody is scrutinizing the bills to make sure that the lawyers aren’t wasting time and money.  And that can lead to problems.  Big ones. 

In class actions, the attorneys are required to go before the court and make a request for fees. And the courts have developed various mechanisms to confirm that class action settlements are fair and that the requested attorneys’ fees are reasonable.  These include fairness hearings, notification requirements, review of time records, and others.

But how can you, a member of a class, tell if class counsel is taking more than its fair share of any settlement. How do you know whether it makes sense to object?  Here are three factors that suggest that the fee request is excessive and that at least some of it should be returned to the class members.

The Defendant Surrendered: I don’t mean settled. I mean surrendered. A recent example is the Volkswagen dieselgate scandal. The class action attorneys didn’t uncover the fraud, the government did. And Volkswagen almost immediately entered into settlement discussions. This was no hard-fought litigation. No trial, no depositions, no appeals, no serious risk that the class action would not result in a settlement.

Despite Volkswagen’s surrender, the various law firms spent, by their own accounting, 120,111.1 hours pushing around paper and negotiating the settlement. 120,000 hours in a case in which the only real issue was what the settlement would look like. Even if it were true that more than 60 lawyer years of work on the case was reasonable (dubious), the idea that the lodestar fees in a case of clear liability should be more than doubled is simply wrong. 

When liability is clear and the defendant surrenders instead of fights, the class members, not the lawyers, should benefit. 

The Lawyers are Piggybacking off Someone Else’s Work: Sometimes class-action lawyers have good ideas, really! They see something that’s wrong, they uncover it, and they bring a lawsuit. Good for them. But much of the time, they are just cashing in on the hard work of someone else.

A government agency, a whistleblower, a consumer. If the lawyers didn’t uncover the case, absent unusually hard-fought litigation, multiplying the lodestar to pay the attorneys…bad. Unfair. Unreasonable.  

The Class Members Don’t Get Anything, or Not Much: There are at least three ways this can happen, and it’s often because the lawyers aren’t keeping their duties to their clients – the class – in mind.

First, any payment from the defendant goes to a charity, not the injured class members. It’s called cy pres. Almost always a sign that the lawyers are about to be grossly overpaid.

Second, the class received coupons, or other non-cash compensation. Have you ever used a coupon from a class action? I certainly haven’t.  Bad sign.

Third, in order to receive cash, class members are required to go through some onerous verification process. Really? Who keeps receipts for purchases they made a decade ago? Nobody. If that type of verification is necessary, odds are that the class-action lawyers are looking out for themselves, not you.

At the end of the day, class actions are important. And lawyers that discover wrongdoing and bring defendants to heel in difficult, hard-fought litigation deserve to get paid. A lot! But that’s too often the exception, and not the rule.   

If you’ve received a notice that a class action has settled, send an email or reach out to Populus Law on Twitter @ClassActionCen1. Populus Law can help you get more settlement dollars in the class members’ pockets. After all, class actions exist to help class members, not lawyers.