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Attorney Fees in Class Action Settlements: An Empirical Study

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  • Theodore Eisenberg
  • Geoffrey P. Miller

Abstract

Study of two comprehensive class action case data sets covering 1993–2002 shows that the amount of client recovery is overwhelmingly the most important determinant of the attorney fee award. Even in cases in which the courts engage in the lodestar calculation (the product of reasonable hours and a reasonable hourly rate), the client's recovery generally explains the pattern of awards better than the lodestar. Thus, the time and expense of a lodestar calculation may be wasteful. We also find no robust evidence that either recoveries for plaintiffs or fees of their attorneys increased over time. The mean fee award in common fund cases is well below the widely quoted one‐third figure, constituting 21.9 percent of the recovery across all cases for a comprehensive data set of published cases. A scaling effect exists: fees constitute a lower percent of the client's recovery as the client's recovery increases. Fees are also correlated with risk: the presence of high risk is associated with a higher fee, while low‐risk cases generate lower fees. Fees as a percent of class recovery were found to be higher in federal than state court. The presence of “soft” relief (such as injunctive relief or coupons) has no material effect on the fee, regardless of whether the soft relief was included in the quantified benefit for the class used as the basis for computing the attorney fee. The study also addresses costs and expenses. Like fees, these display significant scale effects. The article proposes a simple methodology by which courts can evaluate the reasonableness of fee requests.

Suggested Citation

  • Theodore Eisenberg & Geoffrey P. Miller, 2004. "Attorney Fees in Class Action Settlements: An Empirical Study," Journal of Empirical Legal Studies, John Wiley & Sons, vol. 1(1), pages 27-78, March.
  • Handle: RePEc:wly:empleg:v:1:y:2004:i:1:p:27-78
    DOI: 10.1111/j.1740-1461.2004.00002.x
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    Cited by:

    1. Giorgio Rampa & Margherita Saraceno, 2023. "Conjectures and underpricing in repeated mass disputes with heterogeneous plaintiffs," Journal of Economics, Springer, vol. 139(1), pages 1-32, June.
    2. Ingo Vogelsang & Nishal Ramphal & Stephen Carroll & Nicholas Pace, 2007. "An economic analysis of consumer class actions in regulated industries," Journal of Regulatory Economics, Springer, vol. 32(1), pages 87-104, August.
    3. Matter, Ulrich & Stutzer, Alois, 2014. "The Role of Lawyer-Legislators in Shaping the Law: Evidence from Voting Behavior on Tort Reforms," VfS Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100452, Verein für Socialpolitik / German Economic Association.
    4. Paul Fenn & Neil Rickman, 2011. "Fixing Lawyers' Fees Ex Ante: A Case Study in Policy and Empirical Legal Studies," Journal of Empirical Legal Studies, John Wiley & Sons, vol. 8(3), pages 533-555, September.
    5. Thomas Ulen, 2011. "An introduction to the law and economics of class action litigation," European Journal of Law and Economics, Springer, vol. 32(2), pages 185-203, October.
    6. Theodore Eisenberg, 2007. "Evidence of the Need for Aggregate Litigation. Comment," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 163(1), pages 158-162, March.
    7. Alberto Cassone & Giovanni Ramello, 2011. "The simple economics of class action: private provision of club and public goods," European Journal of Law and Economics, Springer, vol. 32(2), pages 205-224, October.
    8. Demirkan, Sebahattin & Fuerman, Ross D., 2014. "Auditor litigation: Evidence that revenue restatements are determinative," Research in Accounting Regulation, Elsevier, vol. 26(2), pages 164-174.
    9. Stephen J. Choi & Jessica Erickson & A. C. Pritchard, 2020. "Working Hard or Making Work? Plaintiffs’ Attorney Fees in Securities Fraud Class Actions," Journal of Empirical Legal Studies, John Wiley & Sons, vol. 17(3), pages 438-465, September.
    10. Eric Helland & Jonathan Klick, 2007. "The Effect of Judicial Expedience on Attorney Fees in Class Actions," The Journal of Legal Studies, University of Chicago Press, vol. 36(1), pages 171-187, January.
    11. Michael Heise, 2016. "Assessing Assessments of Israel's 2006 Class Action Law," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 172(1), pages 108-112, March.
    12. Sophie Harnay & Alain Marciano, 2011. "Seeking rents through class actions and legislative lobbying: a comparison," European Journal of Law and Economics, Springer, vol. 32(2), pages 293-304, October.

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