Federal Appellate Courts Continue Crackdown On Plaintiff Attorneys' Fees In Class Action Cases

Friends of Ours ^ | 02/22/13 | Friends of Ours

[AtlasStalled]

Federal appellate courts across the country increasingly are reversing settlement agreements and fee applications approved by the lower court judges in class action cases.

Yesterday the U.S. Court of Appeals for the Third Circuit "threw out a class-action settlement" in an antitrust action involving baby products "that would have paid the lawyers who negotiated it more than four times as much as their clients" -- $14 million to the lawyers and only $3 million to the class -- as reported by Daniel Fisher for Forbes: "it acknowledged the 'potential for conflict' between lawyers primarily interested in a fee and their clients, who are primarily interested in winning money," and ruled "that courts need to consider the level of direct benefit provided to the class in calculating attorneys' fees."

Download Baby Products Decision

Last July the Ninth Circuit Court of Appeals reversed a deal which awarded $2 million in attorneys' fees to the plaintiffs' lawyers but provided the class members -- consumers who purchased Frosted Mini-Wheats after an ad campaign by Kellogg claiming the cereal improved children's attentiveness -- with only "a 'paltry' $5 a box for up to three boxes" as reported by Maura Dolan for the Los Angeles Times. Writing for a unanimous three-judge panel, Judge Stephen S. Trott held:

"[T]he $2 million award of attorneys' fees is unreasonable. Indeed, because the settlement grants counsel "a disproportionate distribution of the settlement" compared with the benefit to the class, it is possible the settlement was "driven by fees." * * * [T]he $2 million fee award breaks out to just over $2,100 per hour. Not even the most highly sought after attorneys charge such rates to their clients."

Download Kellogg Decision

And in June 2012 a unanimous three-judge panel from the Seventh Circuit Court of Appeals put the kibosh on a derivative action brought on behalf of shareholders by the law firms Vianale & Vianale and Sarraf Gentile against retailing giant Sears as reported by Daniel Fisher for Forbes. In an opinion written by Judge Frank H. Easterbrook the appellate court held "this litigation is so feeble that it is best to end it immediately," and "the only goal of this suit appears to be fees for the plaintiffs' lawyers."

Download Sears Decision

Critics of class actions often argue that many cases serve as little more than vehicles by which the plaintiffs' lawyers get rich, and often the district judges do little in protecting the interests of the class members when approving the settlement agreements and fee applications; however, the three above decisions suggest that the appellate courts no longer may be willing to allow the district judges to rubber stamp the deals with gratuitous recitations of the governing standards.

[RetiredTexasVet]

The whole suit was a pile of smelly BS. Are there any consumers out there, other than Ivy League graduates, that truly believe a breakfast cereal will improve your mind? The clients, the lawyers and the judge that allowed this suit are all idiots.

[jeffc]

I have an under active thyroid, so I must take levothyroxine. It used to be Synthroid, but then the makers were sued in a class-action suit for trying to prevent others from making and selling the drug as a generic (for less $$).

I read the very teeny, tiny fine print of the suit and the "attorneys" doing the suing would walk away with millions, I would get a coupon good for one month's free Synthroid. The more people the "attorneys" got to join the suit, the more $$ they would make.

I declined to participate.