How Do You Get a Group of Lawyers to Smile for a Photo?
Have them say, “Fees!”
Ah, the classic lawyer jokes. They often play on the stereotype that lawyers are more interested in money than anything else, a sentiment that can apply to many professions. However, if a judge starts a case with a lawyer joke, it’s probably a bad omen for the attorney’s fee request.
The Case in Texas
This scenario recently unfolded in a federal district court in Texas, involving a fee multiplier in a common-fund case. But before diving into the case, let’s understand what fee multipliers and common-fund cases are.
Fee Multipliers in Common-Fund Cases
A fee multiplier allows attorneys to receive a percentage increase over their standard fees, rewarding exceptional performance or the risk of representing a class on a contingency basis. For instance, a 1.5 multiplier means attorneys receive 150% of their standard hourly fees. However, these multipliers can be controversial.
The common fund doctrine usually applies in personal injury and class action lawsuits, where the defendant agrees on a settlement amount covering all costs, including plaintiffs’ claims, attorneys’ fees, and administrative expenses. This setup can benefit plaintiffs by preventing insurance companies from claiming the entire settlement amount for uncovered medical expenses and enabling plaintiffs to hire counsel without upfront costs.
However, applying a multiplier to attorney’s fees in common-fund cases reduces the settlement portion available to plaintiffs, creating a financial conflict between attorneys’ gain and plaintiffs’ recovery.
The Texas Decision
In a recent decision by the United States District Court for the Northern District of Texas, the court addressed fee multipliers in a class action lawsuit involving a common fund. The plaintiffs’ attorneys requested a 1.9 multiplier, an additional 90% on top of their standard charges. Judge Brantley Starr, in denying this motion, referenced an episode of The Simpsons, where a lawyer humorously claims the right to shake clients by the ankles to see what falls out.
Judge Starr, known for his tough stance on lawyers who disagree with him, once mandated “religious-liberty training” for Southwest Airlines lawyers by a Christian legal group of his choice for insufficient compliance with his order.
While fee multipliers are rarely contested by defendants, as they no longer care about the money post-settlement, the Supreme Court provides guidance on the reasonableness of attorney’s fees and multipliers in class action lawsuits through the Johnson and Lodestar tests. The Johnson test uses 12 factors to determine the reasonableness of attorneys’ fees.
Although Judge Starr preferred the Lodestar test, he concluded that Fifth Circuit precedent mandated the Johnson test. After applying the Johnson test, he found the Lodestar amount accurate under both tests.
In summary, the attorneys did not receive the 30% of the $33 million award they sought, ending up with about $5 million instead. At least they avoided mandatory training sessions.