I’m generally disinclined to criticize the plaintiff’s class action bar, despite the fact that it ordinarily produces monumental fees for itself and little material value for its purported class. I recognize that it’s important to mount a class against large corporations to stop bad actors from small but pervasive wrongs, and this is the only way to do it. I know all this.
But the Ford Rollover class action was an outrage. From WSJ Law Blog :
The AP has a story out Monday taking a sort of retrospective snapshot on the Ford Explorer rollover class-action litigation. As part of a settlement reached last year, the nearly 1 million class members covered by the lawsuit each received the opportunity to claim a coupon worth either $300 or $500 toward the purchase of a new Ford vehicle. As of June 2009, according to the piece, only 75 people had used the coupons, at a cost to Ford of $37,500. The plaintiffs’ lawyers, meanwhile, took home $25 million in fees and expenses.
That this case settled for coupons for the class members is absurd. That the judge approved this settlement is ridiculous. That the attorneys for the class were paid $25 million is the stuff of tort reform.
Class actions are very expensive to litigate. It’s understandable why the legal fees appear grossly disproportionate to the payouts to individual class members. After all, that’s the reason why class actions are necessary in the first place, that the individual loss may be small or trivial, but added together can amount to a very substantial amount of money of a very real harm done the class.
But this settlement, coupons for the class and a huge check for the lawyers, was a sellout. That these lawyers agreed to, and that this judge, approved this settlement feeds everyone’s worst nightmare about lawyers, and the plaintiff’s bar in particular, and rightfully so.
The lawyers blame the coupon settlement on the economy and Ford’s prospects for bankruptcy. That’s nonsense. They weren’t worried about the economy when they went to cash their legal fee check. If someone can offer a legitimate justification for this settlement, I would appreciate it. But I doubt anyone can do so.
These are the sorts of issues that people have in the back of their mind when they retain me. As a lawyer, I won’t be responsible for conduct such as this. Like others, I too am outraged.
Last year, Sacramento County Superior Court Judge David De Alba authorized the settlement of a class action that lawyers argued could be worth as much as $500 million to people who owned Ford Explorers during the 1990s. As part of the settlement, Ford customers could receive a $500 discount coupon toward the purchase of a new SUV or a $300 coupon to buy another Ford vehicle.Does it come as a shock that owners of a vehicle that has an unfortunate tendency to rollover are unlikely to want another one? This wasn’t compensation for past wrongs, but fundamental malpractice and outrageous greed. These lawyers sold out their clients, the class. This judge can’t possibly be that blind to not realize that approving a $25 million fee when the class received nothing of value was wrong.
Class actions are very expensive to litigate. It’s understandable why the legal fees appear grossly disproportionate to the payouts to individual class members. After all, that’s the reason why class actions are necessary in the first place, that the individual loss may be small or trivial, but added together can amount to a very substantial amount of money of a very real harm done the class.
But this settlement, coupons for the class and a huge check for the lawyers, was a sellout. That these lawyers agreed to, and that this judge, approved this settlement feeds everyone’s worst nightmare about lawyers, and the plaintiff’s bar in particular, and rightfully so.
The lawyers blame the coupon settlement on the economy and Ford’s prospects for bankruptcy. That’s nonsense. They weren’t worried about the economy when they went to cash their legal fee check. If someone can offer a legitimate justification for this settlement, I would appreciate it. But I doubt anyone can do so.
These are the sorts of issues that people have in the back of their mind when they retain me. As a lawyer, I won’t be responsible for conduct such as this. Like others, I too am outraged.
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Now Scott, I have to disagree with you about this one. At least partly.
I agree that there was not enough for the class. I disagree with the focus on the attorney’s fees. As I think you understand, class actions are primarily public interest litigation. The lawyers are representing clients, but acting in the interest of the public as well.
There’s a huge amount of work in any Plaintiff’s case. In a class action, that work is multiplied many times over. In addition, there is the risk of a complete loss, and no compensation whatever, for that huge amount of work. The risk is not negligible, either.
If you don’t let the Plaintiffs’ lawyers reap the reward when they ring the bell, they’d be crazy to take the risk.
There will be no stories in the media, by the way, about the cases, class action and otherwise, that the relevant law firm took and lost on.
That really has to be factored in, in a big way, if you want to understand the matter in more than a surface way. It’s something that the media will never understand, but lawyers should understand it and stand up for their colleagues, at least a little.
And by the way, lots of government benefit programs could be criticized the same way, where the bureaucrats administering them are paid big salaries in order to distribute relative pittances to the “beneficiaries”.
It’s just completely unfair to judge the level of attorney’s fees in class actions relative to what individual members of the class receive. This case is prally not out of line with what derivative action shareholders get vis-a-vis their attorneys.
Coupons to buy another Ford? Coupons? Not this time, John.
The judge could have raised an eyebrow and said, “Coupons? Why sure. I’ll approve the settlement contingent on your accepting the fee in the same medium of exchange. Coupons. Not redeemable for cash.” Think they would have gone back to the table?
SHG
Thank you for this post, you said it well and it is unfortunate for the gross unfairness perpetrated by some attorneys to effect others.I however believe what you said, people will have that in the back of their minds.
Well, company X, Inc., goes bankrupt in Chapter 11 and the shareholders are looking at a big goose egg; the pending class action on behalf of the poor shareholders is settled in the BK proceeding and you know what they wind up with most of the time? Warrants to buy stock in the reorganized company at a fixed price, thought to be (though not necessarily) at a discount to the market price.
What’s the difference here? You could say: Why would the shareholders pay again to buy stock after having been so royally screwed over on the stock they had before? But it’s the typical outcome.
Shareholders and consumers are at the bottom of the pecking order. If they didn’t have lawyers they’d get nothing at all. Or, what is perhaps more to the point, the system would just forget about them entirely, and at least THAT didn’t happen.
The problem is that the little guy gets screwed, and it didn’t just happen in the Ford case.
I mean, I think it’s worth questioning whether the whole class action concept isn’t seriously flawed for that reason: it really is just a way for the powerful to posture with a largely hollow sop thrown to the unwashed masses. I don’t think the flaw is that lawyers make a good fee when they win or settle one.
Maybe I’m just getting a little set off whenever anyone complains about lawyer’s fees. As far as I am concerned, REAL Plaintiff’s lawyers and REAL criminal defense lawyers are often seriously under-compensated so in the odd case where it appears they are overcompensated I say: so what? Do as much complaining about the low pay as you do about the high pay and maybe you’ve got a leg to stand on.
Look what some Wall Street morons got paid while they wrecked the economy, and the absurd pensions public employees get, and the ridiculous sums paid to movie stars and athletes, and, oh, like a million worse economic imbalances than that Ford case. Some executives at Goldman Sachs received bonuses lots higher than the $25 million that law firm received. And their victims didn’t even get coupons.
Iohno. Maybe I just liked it when you challenged someone, anyone, to make an argument on this one. I thought I did ok.
And the article quotes the law firm as saying they had spent $6 million of their own money on the case. Assuming that is true, and given the significant chance that they could have some away with nothing and out $6 million, does $25 million seem so outrageous?
Legal fees don’t exist in a vacuum. You don’t get them because you spent money. You get then because you provided a service to your clients, acheived an outcome on their behalf and fulfilled your duty to them. Coupons. It’s not that $25 M is so outrageous, but that it’s outrageous given that the lawyers got $25M and the class got worthless coupons. The lawyers got $25M and the class got screwed.
Scott, these were not the people who were injured by the defective product. These were people who simply bought a defective product with no discernible damage beyond that. Ford now has to pay out something for that, even if it’s in the form of coupons towards another presumably non-defective vehicle.
To get there, it apparently took seven years and $6 million of the law firm’s money, all the while being paid nothing. And it’s fair to assume that the law firm is a pretty big operation because you can’t do class actions against Ford unless you are.
What do you think the class is due, having suffered no injury other than simply owning a serviceable but defective product? I would say they aren’t due a heck of a lot anyway. Something, but not much.
Maybe lawsuits like this shouldn’t even be brought or authorized. Maybe they really don’t accomplish much of anything, other than to pay the lawyers. That’s a fair point. But as things stand, lawyers who are in a position to do it arguably ought to, because it’s the law.
I just object to attorney’s fees being the focus of all the complaining.
Also, there was an apparently months long bench trial. You think the judge isn’t basically running this show? The law firm undoubtedly settled for the best they thought they could do given that if they didn’t the judge could send them away with nothing, which would have been an implicit, if not explicit, threat.
I got your point the last two times, John. You’ve now offered a great argument for why this may not have been a great case to begin with, which isn’t a good reason to pay the lawyers but a good reason for the case to have been dismissed. If the class suffered no cognizable harm, then the wrong was in bringing this class action, not in recovering bupkis and getting a $25M payday.
On the other side, your focus on the legal fee ignores that lawyer don’t get paid just because you want lawyers to get paid. There’s a quid pro quo; they serve their clients. Fail to serve your clients and you don’t get paid. You cannot promote a legal fee and simultaneously ignore that there is concurrent responsibility. When lawyers fail to fulfill their duty to their clients, they should get nothing. That’s how it is supposed to work.
“What do you think the class is due, having suffered no injury other than simply owning a serviceable but defective product?”
If the case is so minor, then what’s the lawfirm due? It’s bad public policy to have a system where a lawfirm can sue for trivialities and recover $25 million in fees because they worked so hard on something so unimportant.
Well, I think I agree with you, up to a point. But the whole idea of the class action is that individually trivial claims add up to something substantial in the aggregate, justifying a lawsuit for policy reasons.
Personally, I don’t like class actions because they confuse the role of the courts. So in that sense I agree with you.
But OTOH it’s the law, and I’m not going to fault attorneys for bringing cases authorized under the law, obtaining relief, however trivial it may seem on an individual basis, and getting paid for the work they did.
Furthermore, the Wall Street Journal, which made a big deal out of this story, is on the anti-lawyer bandwagon all the time, although they don’t object to lawyers for the establishment being paid, it’s just lawyers for criminal defendants and individual civil plaintiffs or class actions that bother them. In other words, they’re fine with lawyers who are not really necessary being well paid; but lawyers who are really needed because someone down the totem pole got screwed? Stop whining and learn how to screw over people yourself! Then you can be a winner and not a loser!
I like the WSJ on some things, but on this issue they are terminally shallow and just pretty much disgusting.
John, I think you’ve made your point clear numerous times now, and found little support for your thoughts. It’s fine that you have your own opinions, and that you’ve picked a side and will blindly support it no matter what reason and intelligence might otherwise dictate, but it’s really not necessary to repeat it at great length numerous times.
As for the WSJ, even they can get something right on occasion. Give it a rest..
The clients received coupons with a demonstrated total value of only $37,500, making the lawyers’ $25 million fee more than 650 times what the clients received. To put it another way, the lawyers got 99.85% of the total awarded. It may be legal, but it’s still disgraceful.