Class members get little in suits

Members of class-action lawsuits increasingly are receiving little, if any, compensation from the cases, while their teams of lawyers are making millions of dollars in legal fees.

For example, plaintiffs who filed a suit against movie-rental company Blockbuster Inc. were each issued two movie-rental coupons and a $1 coupon in the settlement. Their attorneys received $9.25 million.

Plaintiffs in a case against Ameritech, a unit of phone services company SBC Communications Inc., won $5 phone cards after saying that they were charged warranty fees on phone lines without notification. The lawyers who brought the two suits against Ameritech made $16 million in legal fees.

Class members in a suit against bottled-water company Poland Spring received coupons for more bottled water from the company, even though their suit charged that the product was not “pure” or “from a spring.” The lawyers on that case earned $1.35 million.

“We’ve all heard stories about abuses in the class-action system — the settlement where the consumer gets a $1-off coupon while the lawyer sails away on his yacht with millions,” U.S. Sen. Charles E. Grassley, Iowa Republican, said at a press conference yesterday.

Mr. Grassley highlighted several of the cases to promote his bill to curb class-action lawsuits. The bill, which is being considered in the Senate this week, would cap lawyers’ fees as well as move larger suits into the federal courts instead of state courts, which are more likely to award million-dollar settlements.

Under the legislation, lawyers’ fees in coupon settlements would be based on the number of hours spent on the case or on the value of coupons their clients receive.

The measure would eliminate several theoretical costs that are usually tacked onto a lawyer’s bill, Mr. Grassley said.

“Multiplier” factors, which often are used to determine the risks lawyers take on for bringing class-action cases to court, would not be acceptable in class-action suits in which there are coupon settlements, Mr. Grassley said.

But the bill would not affect rates trial lawyers can charge, with some hourly rates as high as $30,000, according to a 2003 study by the Manhattan Institute, a New York think tank.

Class-action lawyers contend that they are asking judges for fair and accurate reimbursements for their time, upfront costs and risks involved in bringing a case.

Gene Crew, a partner at the San Francisco law firm Townsend and Townsend and Crew LLP, and a team of 35 law firms settled a price-fixing case against Microsoft Corp. for $1.1 billion in May.

The attorneys for an estimated 14 million class members asked the judge for $258 million, the largest amount in an antitrust case.

The cost came to about 19 percent of the settlement and could have been higher, Mr. Crew said.

Plaintiffs’ attorneys generally ask for 33 percent of a class-action settlement.

They can charge even higher, up to 44 percent, if they advance the cost of bringing the case to court, Mr. Crew said, describing the legal fee as a deterrent to large companies from further criminal activity.

“The courts award attorneys their fees, and they must give some incentives for good lawyers to bring worthy cases, fight hard, sacrifice hours of work and take on large risks,” he said.

But Larry Schonbrun, a San Francisco lawyer who is objecting to the legal fees in the Microsoft case, said about 25 of the law firms were unnecessary and inflated the legal team’s bill. “Also, it appears the class members will get very little from the settlement,” he said.

For now, judges have the final say on reducing high legal fees.

U.S. District Judge John Gleeson in December reduced the lawyers’ fee request from $600 million to $220 million in a $3 billion settlement in an antitrust case against Visa USA Inc. and MasterCard International Inc.