Critics hit law firms’ bills after class-action lawsuits

The Boston Globe discusses Thornton Law Firm’s legal fees in class-action lawsuits with CEI’s Center for Class Action Fairness’s founder Ted Frank.

Critics of the way lawyers are paid in class-action lawsuits acknowledge that firms often dramatically mark up the rates of their lower-paid attorneys when seeking legal fees in court, but they say Thornton has pushed the practice to an extreme.

“This happens all the time,” said Ted Frank, a lawyer at the Competitive Enterprise Institute in Washington and a leading national critic of legal fees in class-action lawsuits. “Lawyers pad their bills with overstated hourly work to make their fee request seem less of a windfall.”

Lawyers in class-action lawsuits commonly receive a major share of any settlement because they are taking the risk that, if they lose, they will be paid nothing.

“The double-counting was likely the result of sloppiness, assuming that there would be no objectors’ or court scrutiny of the fee request,” said Frank, who has successfully challenged several settlements and fee requests in other cases, recouping more than $100 million for class members.

Frank said the problems with the legal fees go beyond the double-counting of attorneys. Other law firms contacted by the Globe said it’s common to list an hourly rate for an attorney several times higher than the attorney’s own pay, because the law firm has many other expenses aside from the lawyer him or herself. However, Thornton listed attorneys’ rates at up to 14 times the lawyer’s wages.

Frank said his analysis suggests that the $75.8 million award to the nine law firms was excessive — by at least $20 million and as much as $48.3 million — in part because the lawyers asked too much in the first place. He said that the lawyers’ own documents show that, in similarly sized settlements, the legal fees average only 17.8 percent.

However, Frank said there’s little oversight of lawyers’ fee claims. Defendants usually don’t care what the plaintiffs’ lawyers receive, because their costs don’t change regardless of how much the plaintiffs’ lawyers receive.

And individual plaintiffs typically get too little money to have a strong incentive to challenge legal fees. In the State Street case, the 1,300 plaintiffs would see increases in their individual payments of only about $20,000 apiece if the lawyers’ fees were reduced by $20 million, Frank calculated. A plaintiff might have to spend that much or more to hire another lawyer to investigate.

Read the full article at The Boston Globe.