Brian T. Fitzpatrick, Assistant Professor of Law at Vanderbilt University Law School, conducted a white paper study examining class counsel fees. The paper, entitled “Do Class Action Lawyers Make Too Little”, is based on the premise that contrary to popular belief, class action attorneys are often underpaid, and a vast majority of the money from a class action settlement goes towards plaintiffs and case expenses.
Popular culture and media slander would have one believe that plaintiffs’ attorneys try class action lawsuits for the sole purpose of exploiting the settlement amount and profiting at the expense of the plaintiffs. Fitzpatrick’s aims were to disprove this idea. In the white paper, Fitzpatrick discusses the role of judges in class action cases, and mentions that judges determine that an attorney will receive a smaller percentage of a settlement from a large case. However, when considering the role of judges in class action cases, Fitzpatrick comes to the conclusion that judges determine attorney fees not based on a normative theory but rather on intuition. As a result, he determines, contingency fee class action attorneys are awarded significantly smaller sums than their counterparts in individual litigation. He postures that awarding comparatively small sums to contingency fee class action attorneys will deter some from pursuing small claims cases, the verdicts of which often function as small punitive measures.
Fitzpatrick’s estimates suggest that collectively, contingency fee attorneys receive only $2.5 billion dollars from federal courts each year, or 10% of all contingency fees received from settlements. While this number may seem excessive, given that the $2.5 billion in fees applies to approximately 300 cases, “the settlements on which these fees were based totaled some $16 billion a year.” Based on this data, class action contingency fee attorneys are collecting approximately 15% of the settlement award from the cases they try, which is significantly less than the amount taken by contingency fee attorneys who operate on an individual basis.
Importantly, Fitzpatrick differentiates between payment rates in small claims cases and large-stakes class action claims. The theory that he creates to make this differentiation is called deterrence-insurance theory, based on the idea that “litigation should both deter defendants from causing harm and insure plaintiffs against those harms when defendants are not deterred”. He continues to say that in small stakes claims, plaintiffs are not insured, defendants are only deterred. Based on this idea, he suggests that in small-stakes claims, plaintiffs’ attorneys should be compensated greatly, and plaintiffs’ awards should be less important, because the primary purpose of the case is to deter the defendant. On this basis, small-claims class action contingency attorneys are even more underpaid than other class action attorneys. Circling back to his discussion on the role of judges, Fitzpatrick suggests that judges should award large fees to small-stakes contingency fee class action attorneys, who are working to deter the defendant, and smaller fees to large-stakes contingency fee class action attorneys, who are working to insure the plaintiff.
Whether or not Fitzpatrick’s proposals will be implemented, or should be implemented, is something to be considered. However, it is important to consider the data he has presented as both large-scale and small-scale class action lawsuits continue to make the headlines.