Concern Trolling Over Class Action Fees (Egg Purchaser Antitrust Edition)

“Let your greatest cunning lie in covering up what looks like cunning,” said Baltasar Gracián, the 17th Century Jesuit priest who wrote about how to survive in a post-Machiavelli world. These days, when tort reformers aren’t busy trying to stack the decks against consumers and injured people, they’re busy concern trolling, claiming to be looking out for the little guy while really waging war against the lawyers who take the risks and put in the time to make things right for the folks injured and cheated by corporate greed.

 

Via Overlawyered, Daniel Fisher at Forbes — who as far as I can tell has never once argued in favor of increasing consumers’ legal rights — is deeply concerned about the lawyers who invested approximately 20,000 hours and $500,000 of their own money, and then fought hard over the past four years, to win a $25 million settlement in an antitrust case (the case involved egg purchasers suing egg producers for conspiring to inflate the price of eggs.) He thinks their request for $7.5 million in fees — less than one-third of the settlement, and less than the $11 million the lawyers would have earned if they had billed the same way the defense lawyers did — should be delayed indefinitely, because, if we spend years picking apart the exact hours worked by every plaintiffs’ lawyer in a class action, “we consumers would have a much better way to judge whether our lawyers are overcharging us for this valuable work.” He wants this process to apply to every class action, so that plaintiffs’ lawyers will go wholly unpaid for years for their “valuable work” while corporate-funded intervenors dream up new objections.

 

Fisher complains, using the passive voice (“it would be unseemly … interestingly, however”) to imply but not actually state that the plaintiffs’ lawyers have done something improper:

It would be unseemly for law firms to collude on their billable rates in an antitrust case. Interestingly, however, the billable rates cluster around certain levels: $750-$950 for senior partners, $375-$450 for experienced associates, and $200-$300 for junior [associates]. While the legal industry might be as competitive and efficient as, say, the egg business, it’s difficult to see how this many firms, linked together with a web of referral agreements, can actually compete on price so their clients get the best deal possible.

Fisher wrote “$200-$300 for junior partners.” I think that was just a mistake, so I corrected it above. Starting with the basics, there’s nothing “interesting” about that clustering of fees: that’s how hourly fees are in the legal marketplace. Walk into a tall building in a downtown metropolis and ask for a top-shelf senior litigator, plus some associates, and you’ll hear those exact rates.

 

But more to the point, “collude on their billable rates?” “Overcharging?” What on earth is Fisher talking about?

 

The cases were all done on a contingent fee. Multiple clients signed up directly, each agreeing to pay one-third or more as a contingent fee, and it was those clients’ claims that was used to create the class action. No client was charged a dime in fees or expenses — all of the work and risk was born by the plaintiffs’ lawyers, who are walking away from those claims with less money in their pocket than the defendants’ lawyers.

 

The lawyers here aren’t even petitioning for attorneys’ fees, not in the way that term is normally understood. They’re just asking for approval of a 30% contingent fee, which unfortunately means they have to satisfy the surreal “lodestar” analysis. In the “lodestar” analysis, the Court takes flight from reality and invents a hypothetical world in which the case was a guaranteed winner and the lawyers were being paid in full each month, just like an hourly billed lawyer. It’s a meaningless and counterfactual analysis, one that ignores the tremendous differences between contingent fee and hourly work. (I’ve previously written about the appalling lodestar method while discussing the Perdue v. Kenny A. case and its impact.)

 

In Fisher’s imaginary world, there’s either (a) hordes of egg purchasers with a couple million dollars lying around in cash that they want to pay for antitrust litigation against their suppliers or (b) a huge market of law firms tripping over themselves to throw a platoon’s worth of lawyers, paralegals and secretaries, plus a half million dollars in out-of-pocket expenses, at antitrust litigation that in a best case scenario won’t pay a dime for years and in a worst case scenario will be a total loss.

 

I’ve written many times before about contingent fee litigation. (E.g. When $35,000 An Hour In Attorneys’ Fees Is Justified In Shareholder Lawsuits).  In reality, there is not a single egg purchasing plaintiff with the means to fund the antitrust litigation – nor would it make sense for them to fund the case even if they had the means, because each of their individual damages is less than what it would cost to pay lawyers to bring the case. Similarly, there is no single law firm that is jumping at the chance to tie up a dozen lawyers, and even more paralegals and secretaries, while throwing half million dollars in a case that had good odds of being dismissed before it even had a chance to be put in front of the jury, or good odds of just plain losing at trial. The biggest firms in this case on the plaintiffs’ side — Susman Godfrey, Quinn Emmanuel and Hausfeld LLP — certainly could have done the cases by themselves, by they likely wouldn’t have wanted to, because they would have borne all of the risks themselves. That’s why antitrust class actions are usually contingent fee, and why the work and costs are typically spread across many plaintiffs’ law firms.

 

If you think an antitrust case is easy or simple, take a look at the initial motion to dismiss filed by the egg producers, think about the extraordinary hostility the U.S. Supreme Court has shown towards antitrust cases recently (and how they’re always looking for new ways to get rid of them, with a new case this term that will likely manufacture yet another hoop for antitrust plaintiffs to jump through just to get the class action certified), then make the conscious decision to spend several million dollars on a whole team of lawyers and their assistants, along with hundreds of thousands of dollars of experts and court reporters and travel and the like, because it might turn a profit.  Maybe.

 

Truth is, Fisher knows that it makes no sense to pretend there is a competitive market for hourly-paid antitrust lawyers representing egg purchasers, because there plainly is no such market. These cases can only be brought on a contingent fee, and given the risk involved in the time value of money, that contingent fee has to be large enough to incentivize lawyers to take the litigation and to fight on the merits of the case as hard as they can. Truth is, plaintiffs’ lawyers generally don’t like to work on any sort of hourly rate, because all that does is slow them down and take them away from working on the case – ask any lawyer at a major firm, and they’ll tell you that tracking and tabulating hours occupies somewhere between 5% and 15% of their time.

 

But the bigger problem here is that we’re comparing apples to oranges. It makes no sense at all to compare contingency fee plaintiffs’ work in a huge, hotly-disputed case to hourly defense work. A defense lawyer for a big corporation collects a nice big fat check every 30 days. A plaintiffs lawyer suing a corporation waits years, working day in and day out, throwing money out of their pockets at the case, with their fingers crossed that they’ll eventually get paid. That’s why contingency fee business lawyers of all stripes, whether in the world of antitrust or otherwise, always demand a fee of at least one third, possibly more, and often with the requirement of the client pay the costs. If, as Fisher suggests, we wanted to look at a “market rate” for this type of litigation, we’ll go right to the actual agreements reached with the clients: one third of any settlement and 40% of a judgment. It says exactly that in the actual fee petition filed by the plaintiffs.

 

But Fisher doesn’t want the plaintiffs’ lawyer to collect a market rate – which would be a third or higher – and he doesn’t even want them to collect the meager 30% they’re requesting now. He wants them to collect as little as possible, and for it to take as long as possible for them to get it. He’s not trying to get a better deal for consumers; he’s trying to make these cases so unprofitable — this settlement already involves lawyers getting paid below hourly market rates — that lawyers won’t take them, resulting in a world where companies won’t have to pay when they cheat consumers.

 

The real scandal is why anyone takes concern trolling seriously.  If Fisher is so worried about plaintiffs’ lawyers “colluding” in the supposed “market” for these lucrative contingency claims that “we consumers” have, why not advocate for expanding third-party litigation funding instead of complaining about it?

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  • Richard Hershberger

    “Fisher complains, using the passive voice…”

    “It would be unseemly for law firms to collude on their billable rates in
    an antitrust case. Interestingly, however, the billable rates cluster…”

    I know this is beside your point, but for the sake of accuracy, this is not the passive voice. “Passive voice” is a technical grammatical term for something else. To make a passive construction, take an active construction with a subject, a verb, and an object of the verb, e.g.

    “John hit the ball.”

    Now have the subject and the object switch places:

    “The ball was hit by John.”

    This is a passive construction. The traditional objection to it is twofold: it is longer, which as a matter of deeply held faith is therefore worse, and the agent–the person performing the action–can be omitted:

    “The ball was hit.”

    Because of this, if you want to produce a weaselly sentence, stating that something is happening but avoiding saying who is doing it, the passive voice is an easy way to do it; the classic example being

    “Mistakes were made.”

    rather than

    “I made mistakes.”

    It is, in other words, one way to avoid explicitly stating the agency of the action. But there are other ways to do this which are not passive constructions. I think you are objecting to how Fisher distances himself from the discussion. He doesn’t say that *he* finds collusion unseemly, making the piece about his opinions, but rather suggests that this is the opinion of some vaguely defined collective.

    The problem with calling this “passive voice,” even apart from the value of using vocabulary correctly, is that nowadays “passive voice” has been eroded to mean nothing more than “This is a sentence I don’t like, but I’m not quite sure why.” It is a catch-all criticism of no meaning. Better to examine and make clear what exactly the objection is.

    That being said, I agree with all your substantive points.

    • http://www.litigationandtrial.com/ Max Kennerly

      You are entirely right.

  • http://www.litigationandtrial.com/ Max Kennerly

    Thanks for the comment, and my apologies for the delay in approving; Disqus ignored my approval of your post.

    So where’s this huge market of egg antitrust lawyers who are willing to go below 30%? I think there should be a bright-line rule that a one-third fee is presumptively appropriate, with rare exceptions. That’s the actual market: one-third or higher. Digging into the claimed hours is nonsense: this case would not have happened if the class members had banded together and tried to negotiate a fee below one-third, much less 30%.