The Effect of Attorney Compensation on the Timing of Settlements

Abstract:     
Using Federal Judicial Center data on class action settlements, we find that plaintiffs' lawyers who expect to be compensated using the lodestar, or hourly fee, method systematically delay settlement to accrue additional fees. Plaintiffs' attorneys who expect to be compensated on a percentage basis of any settlement or award, on the other hand, settle their cases more quickly as predicted by the Spier (1992) settlement model. These results cast doubt on the potential for lodestar calculations to police the conduct of plaintiffs' lawyers in class actions.

Keywords: Class Action, Lodestar, Attorney Fees, Judges, Lawyers

JEL Classifications: K00, K42, J22, D82

Working Paper Series