Pennies for Plaintiffs, Millions for Lawyers

Bloomberg describes how the Center for Class Action Fairness challenge lawsuits that benefit the lawyers more than the plantiff's themselves, and briefly mentions the In re HP Inkjet Printer Litigation case.

Concern over this issue has begun to expand beyond grousing libertarians, with courts and legislators moving to restrain some of the worst excesses. So this story is not entirely surprising: The judge presiding over a Hewlett-Packard shareholder suit has balked at the $48 million in fees negotiated by attorneys in a settlement. The amount of money that shareholders were going to get was not negligible, unlike some of the consumer suits where the victims get a coupon good for more product from the company they've accused of doing them wrong. But the judge seems to think that it's disproportionally small compared with what the lawyers were getting.

Proponents of these sorts of fee structures may argue that they are a check on corporate abuses. Of course, they're also an incentive for legal abuses. In mass torts, where attorneys can't necessarily or easily be fired by their "clients," the attorneys don't prosper by negotiating the largest possible settlement for their client; they prosper by negotiating the largest possible set of fees for themselves. And one way to negotiate that is to offer up something very valuable to the firms they're suing — negotiating lower payouts for each beneficiary, for instance, preferably something like a coupon that most people won't bother to redeem.

Read the full article at Bloomberg.