Attorneys Fees in Class Action Settlements: An Empirical Study

71 Pages Posted: 8 Oct 2003

See all articles by Theodore Eisenberg

Theodore Eisenberg

Cornell University, Law School (Deceased)

Geoffrey P. Miller

New York University School of Law

Date Written: September 24, 2003

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 attorneys' 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 below-average 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, whether or not the soft relief was calculated in the quantified benefit for the class used as the basis for computing the attorney's fee. The study also addressed costs and expenses. Like fees, these displayed significant scale effects. The paper proposes a simple methodology by which courts can evaluate the reasonableness of fee requests.

Suggested Citation

Eisenberg, Theodore and Miller, Geoffrey P., Attorneys Fees in Class Action Settlements: An Empirical Study (September 24, 2003). Cornell Legal Studies Research Paper No. 04-01; and NYU, Ctr for Law and Business Research Paper No. 03-23. Available at SSRN: https://ssrn.com/abstract=456600 or http://dx.doi.org/10.2139/ssrn.456600

Theodore Eisenberg

Cornell University, Law School (Deceased) ( email )

Myron Taylor Hall
Cornell University
Ithaca, NY 14853-4901
United States

Geoffrey P. Miller (Contact Author)

New York University School of Law ( email )

Center for the Study of Central Banks
40 Washington Square South
New York, NY 10012-1099
United States
212-998-6329 (Phone)
212-995-4590 (Fax)

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