Attorney Lionel Hutz graduated from Princeton School of Law. He seldom won and cobbled shoes to pay the bills.
The Third Circuit today affirmed orders that awarded about $567 million in "common fund" fees. The money goes to law firms that helped win $6.44 billion in settlement funds. The claims asserted that Wyeth's weight loss drugs, fen-phen (fenfluramine and phentermine) and dexfenfluramine, caused class members to develop valvular heart disease. In re Diet Drugs (Fenfluramine/Phentermine/Dexenfluramine) Product Liability Litig., No. 08-2363 (3d Cir. Oct. 8, 2009).
The court made some points on matters that tend to confuse people about fees in class actions. These include:
- In common fund cases, the court awards fees out of the valuable things — usually cash — that class counsel obtain for class members. Common fund cases differ from fee-shifting cases, where a losing party has to pay the other side's fees on top of damages. The court pointed out that Diet Drugs involved a common fund, rejecting an objector's argument to the contrary.
- The risk of a class action case varies over time. At the outset, with uncertainty at its height, the risk of receiving nothing for pursuing class claims hits a peak. But it doesn't go away. As Diet Drugs shows, bad things can happen even after you ink a settlement.
- A risk multiplier in big class cases — the successful ones anyway — often ranges up to four times the "lodestar" (the lawyers' hours times their hourly rates). The boost compensates for all manner of risk – of losing on the merits, of losing on procedural grounds, of non-collection, and a great many other bad things that could thwart a recovery.