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More facts on attorney fees

April 19, 2012 8:25 AM

Brian T. Fitzpatrick

It is true, as Mr. Frank notes, that courts generally award smaller fee percentages in bigger settlements, but, even still, the data do not support the conventional wisdom that the lawyers are making out with everything: the mean and median fee awards in class action settlements are only 25%, and the highest fee percentage awarded in any case over the two years in my study was 47%. Even 47%--which was an outlier by any measure--is far from everything.

Mr. Frank claims that these numbers are misleading, but I think his criticisms miss the mark. He says that my numbers are driven down by securities fraud settlements because courts tend to award lower percentages in those settlements; he suggests that the numbers are "much" higher in other areas. My study did show that percentages in securities cases are lower than the percentages in some of the other subject areas, but the percentages are not "much" different: as Tables 8 and 12 of my study show, the percentages in other areas are only two or three points higher. (Mr. Frank thinks that even this is perverse because he thinks securities fraud class actions are much more difficult to bring in light of their stricter pleading standards. But Mr. Frank forgets that it is much easier to certify a securities fraud class action than it is to certify most other class actions due, among other things, to the fraud-on-the-market presumption of reliance. Overall, I suspect it is actually less risky to bring a securities fraud class action.)

Mr. Frank also claims that my numbers are misleading because they are based on exaggerated denominators: class action lawyers, he says, ask for a percentage of the value of the injunctive relief they win as well as the cash they recover, and the values they place on these injunctions are not real. Class action lawyers may ask for it, but my study did not give it to them: my study included valuations of injunctions in the denominator only when the valuations were by courts rather than lawyers (and this was not very often). All told, only 4% of the $33 billion denominator in my study comes from valuations of non-cash relief. Even if this amount is thrown out, the share taken by class action lawyers barely budges: it is still right around 15%.

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