On Point: To the victors
By Vincent Carroll
Thursday, September 1, 2005
Do class-action lawsuits against corporate wrongdoers exist primarily to provide fabulous riches to a few attorneys or to recompense victims of the companies' mischief?
Denver District Judge John Coughlin faced this question squarely this week in a case involving Qwest Communication's failure to pay a 53-cent dividend when it merged with U S West. Sadly, Coughlin threw in his lot with the attorneys. He said lawyers led by the Los Angeles firm of Lerach Coughlin deserve $15 million in fees and $1.3 million in out-of-pocket expenses from a $50 million settlement, despite protests from the Association of U S West retirees, because they "took the gamble" other law firms declined. "A lot of lawyers had a crack at it but didn't do it," he explained.
Never mind that shareholders will net less than 10 cents per share, according to the retirees' attorney. And that the $15 million fee ensures the equivalent of sky-high hourly rates even for paralegals - more than $400, it seems.
Don't even ask what the lead attorneys will rake in.
If you read only the judge's comments, you'd think these sorts of lawsuits would simply dry up if attorneys weren't guaranteed the equivalent of a Powerball bonanza every time they won a class-action suit - even one, apparently, in which their clients receive less than a fifth of what they say they're owed.
Sorry, that's like arguing that American capitalism would founder if the average CEO weren't compensated like the sultan of Brunei. Smart people do try to make that case, but it's usually self-serving twaddle.
Winning attorneys in class-action suits deserve a healthy payday. But the truth is they'd get one even if they received their normal hourly rate, which exceeds $600 for at least four attorneys in this case. What they don't deserve is to have their demand for a jackpot given priority over the victims on whose behalf they allegedly toiled.