Federal Appellate Courts Continue Crackdown On Plaintiff Attorneys' Fees In Class Action Cases

[Valin]

Friends Of Ours:

2/20/13

 

Federal appellate courts across the country increasingly are reversing settlement agreements and fee applications approved by the lower court judges in class action cases.

 

Yesterday the U.S. Court of Appeals for the Third Circuit "threw out a class-action settlement" in an antitrust action involving baby products "that would have paid the lawyers who negotiated it more than four times as much as their clients" -- $14 million to the lawyers and only $3 million to the class -- as reported by Daniel Fisher for Forbes: "it acknowledged the 'potential for conflict' between lawyers primarily interested in a fee and their clients, who are primarily interested in winning money," and ruled "that courts need to consider the level of direct benefit provided to the class in calculating attorneys' fees."

 

(Snip)

 

Last July the Ninth Circuit Court of Appeals reversed a deal which awarded $2 million in attorneys' fees to the plaintiffs' lawyers but provided the class members -- consumers who purchased Frosted Mini-Wheats after an ad campaign by Kellogg claiming the cereal improved children's attentiveness -- with only "a 'paltry' $5 a box for up to three boxes" as reported by Maura Dolan for the Los Angeles Times. Writing for a unanimous three-judge panel, Judge Stephen S. Trott held:

 

[T]he $2 million award of attorneys' fees is unreasonable. Indeed, because the settlement grants counsel "a disproportionate distribution of the settlement" compared with the benefit to the class, it is possible the settlement was "driven by fees." * * * [T]he $2 million fee award breaks out to just over $2,100 per hour. Not even the most highly sought after attorneys charge such rates to their clients.

 

(Snip)