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 lawsuit with Exxon Mobil Corporation has come under broad criticism, as lawmakers and environmentalists have questioned why the state would agree to accept only $225 million – a small fraction of the $8.9 billion in damages it was seeking in court.

But if the deal is approved, the state will not even get that much: New Jersey’s recovery will most likely total about $180 million or so, after attorney fees and expenses are deducted, records show.  The litigation was handled on a contingency basis by an outside law firm, Kanner & Whitely of New Orleans, which specializes in environmental lawsuits.  The firm, retained by the state, had worked closely with its attorney general’s office and Department of Environmental Protection, the records show.

A state official said that the Kanner firm would receive roughly 20 percent of any recovery, if the settlement and attorney fees were approved by a judge.  In the decade or so of litigation in the Exxon case, the state, working with the Kanner firm, won key rulings on liability.  Last year, a trial commenced to establish what damages Exxon should pay for contamination at two refinery sites in northern New Jersey.

The firm was to be paid on a contingency basis, with a sliding scale that included a fee of 20 percent of recoveries over $25 million after a trial, according to the retainer agreement, signed by attorney general at the time, Peter C. Harvey, and the lawyer Allan Kanner.  A judge later invalidated that fee scale, saying the rates had to comply with New Jersey’s court rules, which do not specify a percentage for recoveries over $3 million except to say the fees must be “reasonable.”  The fees also had to be approved by a judge.

Since that ruling, the attorney general’s office has endorsed the original fee scale, including the 20 percent figure, as “presumptively reasonable,” according to a 2010 filing by the office in a $3 million settlement handled by the Kanner firm.  Under the state’s retainer agreement, litigation costs are born by the outside firm if there is no recovery by the state.

In deciding whether to approve the legal fees in the Exxon case, Judge Hogan would quite likely consider issues like the risk the law firm undertook, the number of hours its lawyers worked and their standard billing rates, said John Leubsdorf, a law professor at Rutgers University who has written extensively about legal fees.