More on the Exxon Valdez punitive damages story

by Kevin Underhill on December 28, 2006

Following up on my post the other day about the lawyers’ share of the possible $4.5 billion Exxon payout — the WSJ Law Blog discussed this yesterday, and provided some additional and interesting numbers. The lawyers’ share of the award has been set at 22.4% of the final judgment, including interest. That’s smaller than the percentage in many contingent-fee agreements, but results in a lot of dollars here.

According to the WSJ, there are 62 law firms representing plaintiffs. Each firm’s share depends in part on how many clients it represents, and there is a three-percent “bonus” for the most-active firms. So each lawyer’s share of the $1 billion+ is a little hard to calculate, but partners at both Faegre & Benson and Davis Wright Tremaine estimated that their firms would each clear over $100 million. Faegre, for example, has 262 partners, so that would be $381,679 each — just $22,451 for each of the 17 years that the case has been pending, but on the other hand there were almost certainly long stretches where little if any work was being done.

Oops — almost forgot the actual plaintiffs. There are 32,677 of them, who will be splitting the other three or four billion (depends on the final interest award). Assuming it’s $3.5 billion, and assuming everybody has an equal share (which isn’t true), each plaintiff would recover $107,108, or $6,300 for each of the 17 years he or she has been waiting. Is it fair that each lawyer on the case will end up with three or four times the cash that an injured party is getting? Let the comments begin.

{ 4 comments }

1 Justinian Lane 12.28.06 at 6:44 pm

If there were fewer plaintiffs than lawyers, no – it wouldn’t be fair. But considering the number of plaintiffs, I think it’s fair.

Another nice number to have would be the amount of money the plaintiffs’ lawyers sunk into this case out of their own pockets.

2 Ted 12.28.06 at 7:02 pm

I actually agree with Justinian here. We’re missing the critical variables of how many hours the lawyers legitimately put into the case (with some deductions for the inevitable redundancies caused by having 62 law firms work on the case), especially given that several hundred million dollars was achievable without any work. If the lawyers are getting several times market rates, then the award is objectionable, but one can’t simply divide one number into two other numbers and come to any conclusions. If Faegre were to hire twenty new real estate partners, their partnership shares would decline, but it wouldn’t make the law firm any more over- or underpaid.

It’s doubtful that Faegre is dividing that money equally amongst its partners. Newer partners probably are entitled to a smaller share than the ones who were with the firm longer while it was carrying a case that hadn’t yet generated any revenue. The associates who were working on the case were getting a salary.

One could be more confident that the lawyers were being fairly paid if there was a market mechanism — or even a simulation of a market mechanism, such as a competitive bidding — to select the attorneys.

22.5% isn’t at all low for a case of this size, especially when the first few hundred million of the award is all but assured.

3 TC 12.29.06 at 12:19 am

Well at least we all know why fuel is $3 a gallon eh?

BTW; hasn’t Exxon already cleaned and polished every rock on the Alaskan shoreline? Buffed the birds, skinned the seals and plucked all sorts of birds as well?

4 Tom T. 12.29.06 at 8:24 am

It would seem reasonable to me for the plaintiffs’ counsel to get a much lower share of the portion of the award that constitutes punitive damages, since presumably that part of the judgment required significantly less work than the underlying finding of liability.

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