The Effect of Attorney Compensation on the Timing of Settlements

24 Pages Posted: 5 Jun 2006

See all articles by Eric Helland

Eric Helland

Claremont McKenna College - Robert Day School of Economics and Finance; RAND

Jonathan Klick

University of Pennsylvania Law School; Erasmus School of Law; PERC - Property and Environment Research Center

Date Written: June 1, 2006

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 Classification: K00, K42, J22, D82

Suggested Citation

Helland, Eric A. and Klick, Jonathan, The Effect of Attorney Compensation on the Timing of Settlements (June 1, 2006). Available at SSRN: https://ssrn.com/abstract=906154 or http://dx.doi.org/10.2139/ssrn.906154

Eric A. Helland

Claremont McKenna College - Robert Day School of Economics and Finance ( email )

500 E. Ninth St.
Claremont, CA 91711-6420
United States
909-607-7275 (Phone)
909-621-8243 (Fax)

RAND ( email )

1776 Main Street
Santa Monica, CA
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Jonathan Klick (Contact Author)

University of Pennsylvania Law School ( email )

3501 Sansom Street
Philadelphia, PA 19104
United States
2157463455 (Phone)

Erasmus School of Law ( email )

3000 DR Rotterdam
Netherlands

PERC - Property and Environment Research Center

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Suite A
Bozeman, MT 59718
United States

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