Do Class Action Lawyers Make Too Little?
42 Pages Posted: 9 Aug 2010 Last revised: 15 Sep 2010
Date Written: August 9, 2010
Class action lawyers are some of the most frequently derided players in our system of civil litigation. It is often asserted that class action lawyers take too much from class judgments as fees, that class actions are little more than a device for the lawyers to enrich themselves at the expense of the class. In this Article, I argue that some of this criticism of class action lawyers is misguided. In particular, I perform a normative examination of fee percentages in class action litigation using the social-welfarist utilitarian account of litigation known as deterrence-insurance theory. I argue that in perhaps the most common class action – the so-called “small stakes” class action – class action lawyers not only do not make too much, but actually make too little. Indeed, I argue that it is hard to see as a theoretical matter why lawyers should not receive 100% of class judgments in small-stakes cases. Of course, it is unlikely that judges in the current political climate will feel comfortable awarding class action lawyers fees equal to 100% of judgments in any type of class action, small stakes or otherwise. Moreover, it is not entirely clear that judges have the legal authority to award fees at such a level. Nonetheless, even if judges cannot award 100% of small-stakes judgments to class action lawyers due to political or legal constraints, deterrence-insurance theory suggests that they should award fee percentages as high as they can in small-stakes cases, which, by any measure, are much higher than the percentages they tend to award now. Unfortunately, deterrence-insurance theory is unable to provide judges with as much guidance in large-stakes and mixed-stakes class actions.
Keywords: Class actions, class action settlements, class action lawyers, attorney fees, civil procedure, law and economics, federal judges
JEL Classification: K41
Suggested Citation: Suggested Citation