Sunday, April 17, 2011

Objectors and fee requests

We recently had two victories in two cases in front of the same judge; the question then becomes whether to submit a fee request. There's good precedent for us asking for fees in both cases on the theory that the objection "improved the process," but we take the position that class attorneys should only recover fees rationally related to the size of the class benefit achieved, so, to remain cleaner than Caesar's wife, we only ask for fees when we actually achieve a pecuniary benefit for the class, and our fee request is always on a percentage basis of the benefit. (Moreover, we only accept fees that are court-ordered, and we do not "settle" our objections unless the settlement results in a fix of the issues we objected to, i.e., we don't make quid quo pro extortionate objections for settlement money.)

A lodestar calculation is a bad idea for objections, because it encourages technical objections that don't benefit the class, and encourages wasteful litigation over fishing-expedition discovery. It's too easy to manipulate lodestar: we see this often in the class action context, where lots of low-paid temp attorneys request and review millions of pointless documents and then get "billed" at over $300/hour. Nor is it a good use of court resources to scrutinize the hourly bills for waste and duplication (which is bound to happen given the number of cases unnecessarily involving multiple law firms). The right way, and most efficient way, to align incentives is, in my view, a reasonable percentage of the recovery.

So, in one case, our only accomplishment was to reduce the exorbitant fee request; we didn't ask for fees for ourselves because the class didn't see a penny of that reduction (though a for-profit objector did request fees, as was their right). In the other case, the parties responded to our objection by modifying the settlement to partially address our concerns, and, as a result, the class received an additional $2.5 million in recovery that would have otherwise instead gone to unrelated third parties (including two schools affiliated with lead class counsel).

A year ago I said we wouldn't seek more than 4.4% in a fee request, but that was when we consisted of one attorney and one part-time volunteer; I was indifferent if we were short on cash flow in any given month, because I live a frugal life and could support myself out of my own savings and occasional poker-playing Las Vegas trips if I had to (as I did for several months). Now that I have other attorneys doing work for CCAF who do depend on CCAF for an embarrassingly below-market income, and who would suffer financially if we ever ran out of money; and now that I find CCAF having to turn down legitimate cases because of lack of resources, I'm hurting my cause by being so noble-minded. And because we only ask for fees to be deducted from class counsel's fee request, the only beneficiary of that noble-mindedness are the trial lawyers who were happy to shortchange their putative clients to begin with.

In the case where we won $2.5 million, the plaintiffs' attorneys made lots of frivolous arguments and filings that raised our costs and time-commitment substantially, and created risk that we wouldn't get any fees at all. We would have been willing to stipulate for a joint application for 3.5% of what we had won, but the plaintiffs' attorneys, embarrassed by our success, insisted on scorched-earth litigation tactics instead (including the standard offensive ad hominem name-calling), so, given the increased risk we were facing, and the increased hassle of having to collaterally litigate attorneys' fees instead of other class action settlements, we saw no reason not to request the full extent of what the law permits—a proportionate share of attorneys' fees, reflecting our contribution to the class recovery. 15% of the class recovery was directly attributable to our objection: why shouldn't we get 15% of the total amount of attorneys' fees? In this case, it works out to an 11.9% contingent-fee request, still well under the 25% benchmark for settlements of this size or the 35%+expenses we see some class attorneys abusively request.

Nevertheless, we operate largely on the basis of the generosity of our donors. If you gave us money between May 30 and today because you thought we were only going to ask for 4.4% of attorneys' fees, and do not believe you have gotten fair charitable value from your donation or are otherwise offended by our fee request, let me know, and we can discuss a refund or a modification of our request.

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