A recent Daily Report story by R. Robin McDonald, “Equifax Class Counsel Defend $77.5M Fee Request, Calling Settlement ‘Unprecedented’,” reports that lawyers representing the class of 147 million people whose personal information was compromised in a 2017 Equifax data breach are asking a federal judge in Atlanta to give final approval to a $1.4 billion settlement agreement, contending it exceeds the value of all previous consumer data breach settlements combined. They also defended their request for $77.5 million in legal fees in court filings.
Calling it the largest recovery in a data breach in U.S. history, class attorneys said the benefits available to consumers meet or substantially exceed those that have been obtained in similar cases. The attorneys also said people with valid out-of-pocket claims tied to the breach will be fully reimbursed, and all class members may claim credit monitoring. Calling their fee request “well-justified and equivalent to or below typical awards,” class counsel said people objecting to the $1.4 billion proposal significantly undervalue the settlement and the risks associated with bringing a data breach case.
“By any measure—the size of the cash fund, the minimum cost to Equifax of $1.38 billion, or the total value to the class when considering the value of the available credit monitoring services—this settlement is unprecedented, exceeding the value of all previous consumer data breach settlements combined,” consumer class attorneys argued in the pleading.
Class lawyers also said their settlement negotiations were complicated by separate negotiations Equifax conducted with the U.S. Consumer Financial Protection Bureau, the U.S. Federal Trade Commission and 50 state attorneys general. Equifax refused to execute the settlement class counsel carved out until it also reached separate agreements with the regulators that included a “take-it-or-leave-it package of proposed changes” and $70.5 million in extra money “but also potentially made class members worse off,” class counsel contended.
“Counsel spent months negotiating with Equifax on these changes and then with both Equifax and the regulators, so that the increased funds could be incorporated without adversely impacting the class,” class lawyers said. “Successfully resolving those problems did not ensure that the extra money would be available … because Equifax refused to execute the settlement until and unless it also reached separate agreements with the regulators, which it wanted to announce as part of a ‘global resolution,’” class lawyers contended. But Equifax had difficulty finalizing those agreements, they said.
Class counsel “forced the issue” by setting a hard deadline and threatening to move to enforce a binding settlement deal they reached separately with Equifax that didn’t include federal regulators or the states. Equifax signed the global deal shortly before the deadline. Citing class action case law when the government piggybacks off of class counsel’s work, additional fees are justified, class counsel said in their filing. The filing stated they shared responsibility with federal regulators for increasing the size of the settlement fund “and should be compensated for their effort.”
Under the terms of the consumer settlement, Equifax will pay $380.5 million earmarked for class benefits, fees, expenses and service awards, as well as notice and administration costs. Equifax also will pay up to an additional $125 million, if needed, to satisfy claims for consumers’ out-of-pocket losses from efforts to defend against identity theft and $1 billion designated to upgrade the company’s data security and technology. Because there is no cap on the settlement, Equifax could pay as much as $2 billion more if all 147.4 million class members sign up for credit monitoring, the class lawyers said. No settlement funds will revert to Equifax.
Class counsel also pushed back against an objection filed by Ted Frank and other objectors who said the legal fees are excessive. The U.S. Court of Appeals for the Eleventh Circuit has approved class action settlements that typically range from 20-30% with a suggested benchmark of 25%, the class counsel said.
Class counsel also contended that claims their fees are disproportionate are “based on a misunderstanding of the settlement.” Class counsel said it was rather an “historic achievement” to require Equifax to spend $1 billion on data security and related technology.
“That Equifax may also benefit makes no difference. Defendants almost always benefit by doing the right thing. … The key question is whether the class is better off. In this case, that is undeniable as the business practice changes will immediately benefit all class members by reducing the risk of another breach. And, according to a top cybersecurity expert, Equifax’s commitment to spend $1 billion will ensure adequate funding to secure class members’ personal information long after this case is resolved.”
The class lawyers also took issue with Frank’s attempts to brush aside the value of credit monitoring services. “The high quality credit monitoring offered here is far better than the free or low-cost services typically available. Moreover, courts have often recognized the benefit of credit monitoring, use its retail cost as evidence of value, and consider that value in awarding fees,” their filing said. They also contended that affected consumers have already signed up for an estimated $6 billion in credit monitoring, based on the retail price.
Class lawyers said that, to date, more than 15 million class members—or over 10% of the class—already have filed claims for credit monitoring, and every class member who submits a valid, out-of-pocket loss claim is expected to be completely reimbursed for losses fairly traceable to the data breach. “If class counsel were awarded 10% of those benefits, the fee would be much larger than requested,” they said.