Norm slams class action fee recoveries
Norm (not McDonald; I like this one a lot better) Pattis complains in Class Action Reform about fee awards, which in his view are run amok.
Norm complains about unfettered greed, notes that the freedom of lawyers to contract is not supposed to be unlimited (they must be reasonable, goes the touchstone), and otherwise knocks class actioneers. Some of us, anyway.
"The savvy lawyer seeks a case involving small harm to a large number of people." Actually, a really savvy lawyer seeks a case with a LARGE harm to a large number of people, ideally with treble damages as well as attorney's fees provided by statute. If by savvy one means greedy, anyway. Assuming there's no competition for that same juicy prize.
In fact, some class action plaintiffs' lawyers probably are greedy. Unlike, say, some criminal defense or civil defense lawyers, I'm sure.
Norm complains about an 800k fee result in a $2.5 million class action involving prisoner strip searches. That works out to a roughly 33% fee, within the bounds of typical contingent fees in individual cases. Now, I would be willing to stipulate that on a $4.5 billion recovery, the correct measure of fees might well be lower than a third - that the pool (usually it's not only not just one lawyer, nor even one firm, but many firms) share from a slightly smaller portion of that gigantic whole. Say, a quarter, or even 20% - it depends.
But the fact that Norm has kept his fees low in 1988 actions doesn't prove that all contingent fees are outrageous. Plaintiffs lawyers working on contingency are taking a risk - the horrible, horrible risk that there won't be a recovery, despite the lawyer time, energy, work, expert fees, and blood, sweat, and tears invested. It's not just disappointing - the way a defense firm feels disappointed when its client, or often its client's insurance carrier winds up having to pay as part of a settlement or for a judgent - it means that the plaintiffs lawyers may lose. Lose big. It's a gamble, it's a risk, it means that you can't take frivolous cases, can't waste time on claims where there's no chance of a sufficient recovery to make it worth it.
There's a reason why class actions are allowed. If they weren't, or if a rule like Norm's proposed rule maxing out the lawyer's fee at "some reasonable muliple of the harm caused to a representative plaintiff," which would make it uneconomical to bring a claim on behalf of 10,000 people who all lost $500, then the Defendants of the world would have an incentive. A bad incentive.
Bad actors would be incentivized to calculate the likely recovery yield (what percentage of injured parties actually sue, what percentage of cases result in some recovery), the likely damage from other related factors (harm to reputation or stock price from being a bad actor), and then deliberately harm thousands of people at a low level. It would be an economically efficient transaction - and thus, practically required. Why, it might justify a shareholder lawsuit if you failed to screw the victims.
To sum up: I'm outraged, but Norm may be right about some outlying fees, but that doesn't mean his rule is sane, but some limitations are a good idea, but we have some in the form of judicial review and approval before accepting attorney's fees, but that doesn't stop Reformers (read: pro-defense lobbyists, all too often) from urging more "Improvement" of the law.
Norm complains about unfettered greed, notes that the freedom of lawyers to contract is not supposed to be unlimited (they must be reasonable, goes the touchstone), and otherwise knocks class actioneers. Some of us, anyway.
"The savvy lawyer seeks a case involving small harm to a large number of people." Actually, a really savvy lawyer seeks a case with a LARGE harm to a large number of people, ideally with treble damages as well as attorney's fees provided by statute. If by savvy one means greedy, anyway. Assuming there's no competition for that same juicy prize.
In fact, some class action plaintiffs' lawyers probably are greedy. Unlike, say, some criminal defense or civil defense lawyers, I'm sure.
Norm complains about an 800k fee result in a $2.5 million class action involving prisoner strip searches. That works out to a roughly 33% fee, within the bounds of typical contingent fees in individual cases. Now, I would be willing to stipulate that on a $4.5 billion recovery, the correct measure of fees might well be lower than a third - that the pool (usually it's not only not just one lawyer, nor even one firm, but many firms) share from a slightly smaller portion of that gigantic whole. Say, a quarter, or even 20% - it depends.
But the fact that Norm has kept his fees low in 1988 actions doesn't prove that all contingent fees are outrageous. Plaintiffs lawyers working on contingency are taking a risk - the horrible, horrible risk that there won't be a recovery, despite the lawyer time, energy, work, expert fees, and blood, sweat, and tears invested. It's not just disappointing - the way a defense firm feels disappointed when its client, or often its client's insurance carrier winds up having to pay as part of a settlement or for a judgent - it means that the plaintiffs lawyers may lose. Lose big. It's a gamble, it's a risk, it means that you can't take frivolous cases, can't waste time on claims where there's no chance of a sufficient recovery to make it worth it.
There's a reason why class actions are allowed. If they weren't, or if a rule like Norm's proposed rule maxing out the lawyer's fee at "some reasonable muliple of the harm caused to a representative plaintiff," which would make it uneconomical to bring a claim on behalf of 10,000 people who all lost $500, then the Defendants of the world would have an incentive. A bad incentive.
Bad actors would be incentivized to calculate the likely recovery yield (what percentage of injured parties actually sue, what percentage of cases result in some recovery), the likely damage from other related factors (harm to reputation or stock price from being a bad actor), and then deliberately harm thousands of people at a low level. It would be an economically efficient transaction - and thus, practically required. Why, it might justify a shareholder lawsuit if you failed to screw the victims.
To sum up: I'm outraged, but Norm may be right about some outlying fees, but that doesn't mean his rule is sane, but some limitations are a good idea, but we have some in the form of judicial review and approval before accepting attorney's fees, but that doesn't stop Reformers (read: pro-defense lobbyists, all too often) from urging more "Improvement" of the law.
Posted by Eh Nonymous on
Wednesday April 19, 2006 at 4:25pm
*Not all comments welcome. Flippant, facetious, fierce, or fatuous, fine. Fraudulent, felonious, fabricated, facially insufficient, and farkin' futile, fuggeddaboutit.