The Obama administration recently announced that BP has agreed to set aside $20 billion to pay economic damage claims to people harmed by the Gulf oil spill. The appointment instructions of the late Edward M. Kennedy’s former chief of staff, Kenneth Feinberg, give no hint as to how much money the lawyers - or for that matter, he and the three-person appeals panel - will be paid from the escrowed account. Will Mr. Feinberg receive a mandate from the president on attorney’s fees similar to the one he received to rein in excessive executive compensation?
Another Obama appointee, Rahm Emanuel, is attributed with the quote, “Never let a serious crisis go to waste.” Unfortunately, this usually refers to a political party taking advantage of a situation for its own benefit rather than for the public good. I believe in the concept of using a crisis to precipitate change, but it should be change that benefits the public. The recent Gulf oil spill and the litigation over Toyota cars’ unintended acceleration provide a golden opportunity to make positive changes in the class-action system.
What these two litigation extravaganzas have put on display are hundreds if not thousands of lawyers jumping over themselves to cash in on corporate wrongdoing. In the Toyota litigation, the court approved leadership roles for committees of lawyers co-leading this and co-liaisoning that - a liaison committee with two lead counsels and seven additional law firms; a lead counsel committee with two lead counsels and six additional law firms; a core discovery committee of two lead liaison counsels, two lead counsels and up to three additional law firms, plus three liaison counsels to coordinate with the discovery committee.
Potential litigation featherbedding is guaranteed to ensure that lawyers get as large a piece of the pie as the judge will tolerate. The pie may be quite large, as the court noted that Toyota’s 2009 revenue was $200 billion and its annual profit was $2.2 billion. Requiring attorneys to maintain time records provides no protection against their manipulating this cash cow to their own advantage. How can it be efficient to have hundreds of law firms, all seeing green at the prospect of taking down a multibillion-dollar corporation, involved in this action? How many of the best $750- to $900-an-hour lawyers are needed to resolve the Toyota legal claims? The litigation surrounding the worsening Gulf oil spill will not be any better and could be much worse. (Unless you’re one of the lawyers, of course.)
Unfortunately, these legal spectacles, complete with billboard advertisements and automated telephone calls to potential victims, have become a kind of Super Bowl for lawyers. These lawsuits are now lawyer feeding frenzies with legal piranhas jockeying for lucrative committee positions from which to dole out patronage - as the saying goes - to the many lawyers’ mouths that need to be fed. Indeed, one of the problems with class actions is that typically, people who are the least injured (i.e., the lawyers) get a disproportionate share of the money, while those who are the most injured get less than they deserve.
Now we have the Gulf oil spill catastrophe. There is no question about guilt, and BP already has said it is going to pay all legitimate damages claimed. How many lawyers are necessary? The answer, unfortunately, is whatever the judge allows. And judging by Toyota, the approach seems to be the more, the merrier. Isn’t there a better way to get money from a guilty defendant to injured claimants without siphoning off hundreds of millions, if not billions, of dollars to lawyers when the defendant already has surrendered?
There has to be a better way. There need to be fewer lawyers and law firms involved in chasing these cases. There need to be reduced hourly rates and lower percentages awarded in cases in which the defendant acknowledges at the outset that it is guilty and has put $20 billion in escrow to make everyone whole. These cases should be about people who are the most injured getting the most money, but, unfortunately, the current class-action system does the very opposite. There has to be a better way.
What was it that Shakespeare said about the lawyers?
Lawrence W. Schonbrun is the executive director of Class Action Watch.
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