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Study: Inconsistency in Fee Calculations in Securities Class Actions

April 10, 2015

An upcoming Columbia Law Review article by law professors Lynn Baker and Charles Silver of the University of Texas and Michael Perino of St. John’s University entitled “Is the Price Right: An Empirical Study of Fee-Setting in Securities Class Actions” (pdf) studies attorney fee awards in securities class actions. The article states:

Every year, fee awards enable millions of people to obtain access to justice and strengthen the deterrent effect of the law by motivating lawyers to handle class actions. But the process by which judges decide how much to pay lawyers remains a black box. Settlements go in one side; fee award come out the other. The inputs and outputs have been studied, but the actual operation of the fee-setting mechanism has not. Consequently, it is difficult to know why judges award the amounts they do or whether they size fee awards correctly.

Both numerically and in terms of dollars recovered, securities cases dominate the federal courts’ class action docket. We therefore undertook to peer into the fee-setting black box by studying in detail all the 434 securities class actions that settled in federal district courts from 2007 through 2012. We examined the actual court filings in each case to create an original, comprehensive dataset of information on all points at which federal judges are likely to consider issues relating to fees. These data enable us to paint a picture of the fee-setting process that is unusually detailed and nuanced and that falsifies many common beliefs.

Among our major findings are that (1) federal judges often deviate from the path Congress laid out in the Private Securities Litigation Reform Action (PSLRA), which requires lead plaintiffs to set the terms of class counsel’s retention and federal judges to serve as backstops against abuses: (2) fees tend to be lower in federal district that see a high volume of securities class actions than among low volume judges; (4) the well-known “decrease-increase” rule, according to which fee percentages decline as settlements become larger, operates mainly in high-volume district; and (5) judges appear to cut fees randomly, that is, on the basis of their own predilections rather than the merits of fee requests. Finally, we learn that so-called “lodestar cross-checks,” which require judges to consider the “time and labor expended by counsel” and other factors to ensure against excessive fees, accomplish nothing. Actual fee awards reflect something closer to a pure “percentage of the fund” approach.

In sum, we found little evidence that the actions currently taken by the courts in securities class actions move class counsel’s fees closer to the “right price.” We therefore propose a set of procedural reforms which courts easily adopt that would make fee-setting in securities class actions more transparent more compatible with the normative goals of the PSLRA, and more predictable. The reforms would encourage lawyers to invest optimally in class actions, with salutary effects for investors seeking compensation and the integrity of the financial markets.

NALFA to Rate Legal Bill Auditing Programs

April 8, 2015

Legal bill auditors are companies who provide quantitative analysis of legal billing entries.  Legal bill auditors help to categorize and summarize billing entries.  Legal bill auditors are hired by clients such as insurance carriers, law firms, corporations, government agencies and municipalities to analyze legal billing entries in underlying litigation and transactional matters.

Legal bill auditing is part art and part science.  No two legal bill auditing programs are the same.  As a professional body, our mission is to ensure quality and reliability across the legal fee analysis profession.  NALFA’s rating system will help fulfill part of this mission.  Our rating program will provide clarity to legal bill auditing.  Our rating system will also assist clients who use legal bill auditing.

Legal billing auditing programs will be rated by process, methodology, technology, personnel, customer service and leadership.  NALFA has identified the following U.S.-based legal bill auditing programs (members and non-members) to be rated:

MBT Legal Fee Solutions (Member)

KPC Legal Audit Services (Member)

Bottomline Technologies (Member)

Alan Gray (Member)

Legal Fee Advisors (Non-Member)

Sterling Analytics (Non-Member)

Legal Cost Control (Non-Member)

Stuart Maue (Non-Member)

LSG (Non-Member)

Hamlin & Burton Liability Management (Non-Member)

CSC (Non-Member)

"We are not interested in legal bill auditing programs being uniform, just competent.  We look forward to working with members and non-members in rating the nation's top legal bill auditing programs," said Terry Jesse, Executive Director of NALFA.

Gary Greenfield: Qualified Expert on Reasonable Attorney Fees

April 7, 2015

Gary Greenfield was one of the charter members of NALFA.  The founder and  principal of Litigation Cost Management (LCM) in Oakland, California, he has been retained in a number of matters related to attorney and expert witness fees and expenses in cases ranging from patent to insurance coverage litigation.  Some of his most recent expert fee/billing engagements include:

Insurance coverage in Federal District Court for the District of Minnesota -- Analysis and testimony in jury trial for policyholder against insurance company regarding fees incurred in defending class action in California

Patent litigation in the Northern District of California —Analysis as expert witness for party opposing post-judgment motion seeking approximately $9 million in legal fees and expenses in patent case. Report in form of Declaration prepared.

Insurance coverage in Federal Court for the District of Minnesota—Analysis for insured seeking in excessive of $42 million in fees and expenses incurred in defending class action brought under ERISA, the Sherman Act, RICO and various state laws. Rule 26 Report prepared and oral testimony pending.

MDL proceeding in the Central District of California—Analysis for defendants of legal fees and expenses sought by multiple class counsel each seeking fees ranging up to $6 million in nationwide class action involving over 50 consolidated lawsuits. Report in form of Declaration prepared.

Insurance Coverage case in Federal Court in the Northern District of California—Analysis for insured seeking approximately $16 million in fee and expenses in coverage dispute involving court and arbitration proceedings in Singapore, San Francisco and Santa Cruz (California). Case involved both allocation and reasonableness analyses. Rule 25 Report prepared.

For more on Gary Greenfield and LCM, visit and his NALFA profile page at

Ohio is Latest State to Seek to Cap Fees for Outside Counsel

March 25, 2015

A recent Columbus Dispatch story, “Ohio Senate OKs Cap on Contingency Fees to Outside Lawyers,” reports that a move to make Ohio the latest to cap what the state can pay outside lawyers in contingency fee contacts passed the Ohio Senate over objections from Democrats and lawyers groups.  The legislation, called Ohio’s Transparency in Private Attorney Contract Act, would set attorney payment caps on a sliding scale, starting at 25 percent of damages up to $10 million and ending with 5 percent that exceed $25 million.

Since 2012, at least 14 states have adopted new rules that limit the use of outside counsel, and several have put caps on attorney fees.  The American Legislative Exchange Council (ALEC), a conservative organization that brings together lawmakers and business leaders to write model legislation, has called for contingency fee caps in legislation called the Private Attorney Retention Sunshine Act.  Ohio Attorney General Mike DeWine supports the bill.

Both the Ohio State Bar Association and Ohio trial lawyers oppose the bill, calling it “a cure in search of an illness.”  They said the caps hinders Ohio’s participation in multistate or national litigation – something DeWine’s office disputes – and make it harder to find lawyers with the expertise to handle what can be complex, specialized lawsuits.

The DOJ recently announced a $714 million settlement with The Bank of New York (BNY) Mellon for overcharging customers on foreign currency exchanges.  Dewine called the settlement “an extraordinary outcome to litigation that was extremely hard-fought for more than four years.”  DeWine didn’t mention the two outside plaintiffs’ law firms who led the fight, including Lieff Cabraser, that stand to earn as much as $43 million from the case.

In the BNY Mellon case, DeWine’s contract with Lieff Cabraser allows for a 13 percent fee, which works out to $43 million for the lawyers. That amount presumably would be shared with Murray Murphy Moul & Basil, which had a similar contract.  Any fee, however would have to be approved by Manhattan U.S. District Judge Lewis Kaplan.  Under the pending Ohio bill, the outside firms’ fees in the BNY Mellon case would be capped at $20 million.

Nearly $1B AIG Securities Settlement Yields $120M Fee Award

March 23, 2015

A recent Reuters story, “AIG Investors’ $970.5 Million Settlement Wins U.S. Court Approval,” reports that American International Group Inc shareholders won approval of a $970.5 million settlement resolving claims they were misled about its subprime mortgage exposure, leading to a liquidity crisis and $182.3 billion in federal bailouts.

U.S. District Judge Laura Taylor Swain in Manhattan granted final approval at a hearing to what lawyers for the investors call one of the largest class action settlements to come out of the 2008 financial crisis. It marks the largest shareholder class action settlement in a case where no criminal or regulatory enforcement action were pursued, the plaintiffs’ lawyers said. For the plaintiffs’ work on the case Swain awarded the law firms Barrack Rodos & Bacine and The Miller Law Firm $116.46 million in attorney fees and more than $4 million in expenses.

Swain noted that no potential class member had objected to the terms of the deal, which she said was strong evidence that is was “fair, reasonable and adequate” and should be approved. She added that the amount was “very substantial” and that shareholders would face significant risk if they continued to litigate instead of settling.

The case is In re: American International Group Inc. 2008 Securities Litigation, U.S. District Court for the Southern District of New York, No. 08-04772. For more on this settlement, visit

Study: $2 Billion in Defense Costs for Class Action Litigation in U.S.

March 18, 2015

A recent study, The 2015 Carlton Fields Jorden Burt Class Action Survey: Best Practices in Reducing Cost and Managing Risk in Class Action Litigation (pdf), reports that across industries, companies...

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Attorney Fees to Take Chunk from New Jersey's Exxon Settlement

March 17, 2015

A recent New York Times story, “Chunk of New Jersey’s Money from Exxon Settlement is to Go to Legal Fees,” reports that New Jersey’s decision to settle a multibillion-dollar...

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SCOTUS Oral Arguments in ASARCO's Bankruptcy Fee Issues

March 16, 2015

A recent Texas Lawyer story, “Tough Questions at $5 Million Fee Fight Before SCOTUS,” reports that predicting how the highest court’s nine justices will rule after they have heard...

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Plaintiffs' Lawyers Challenge Huge Fee Reduction Sought by NCAA

March 13, 2015

A recent USA Today story, “O’Bannon Lawyers Fight Huge Fee Reduction Sought by NCAA,” reports that lawyers for the plaintiffs in the Ed O’Bannon antitrust class action against...

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$6.2M Fee Award in Hurricane Katrina Insurance Coverage Litigation

March 12, 2015

A recent Texas Lawyer story, “$6.2 Million in Attorney Fees, Costs Awarded in Hurricane Katrina Insurance Litigation,” reports that even though it’s been almost 10 years since...

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