A Thousand Little Refunds, Plus Attorneys Fees

by David Nieporent on October 2, 2007

For $800,000, one could buy a nice house, two thousand iPhones, about five days’ worth of Alex Rodriguez’s contract, or 1,700 hours of class action lawyers producing absolutely nothing of any value to anybody.

In January 2006, The Smoking Gun reported that James Frey’s A Million Little Pieces memoir had significant inaccuracies. After a few days of denial, Frey admitted that the book was inaccurate. The publisher, Random House, immediately posted a statement to that effect on its website and offered a refund to anybody who was upset. Approximately 12 seconds later, hordes of trial lawyers copied down the allegations from The Smoking Gun’s website and rushed to the courthouse to file “consumer fraud” class action lawsuits against Frey and Random House. They demanded… that Random House post a disclaimer and give refunds to anybody who was upset. In a sane world, those lawyers would have been sanctioned for filing a frivolous lawsuit, and then sanctioned again for wasting everyone’s time by asking for a remedy that had already been achieved.

But as we know, this world is Overlawyered, so, more than 1,700 hours of trial lawyer time later, Random House agreed to settle the case for “up to” $2.35 million, to cover refunds, costs, and attorneys fees for the up-to-3.5 million people who purchased the book before Frey admitted it was inaccurate.

And now the other shoe has dropped, exactly as Walter predicted in May. The deadline for class members to submit their claims was October 1st, and according to filings by the class lawyers, a grand total of 1,345 people had done so by September 17th; based on past experience, they expected another 250 submissions in the last two weeks before the deadline. Yes, that total would be less than one-half of one percent of those who bought the book — the alleged “victims” of the alleged “consumer fraud.”

But despite this dismal response rate, the class action lawyers have now submitted their fee request… $783,333.33 — or one third of the imaginary $2.35 million settlement. Plus $14,000 in expenses. The lawyers defend this fee as reasonable on the grounds that they spent those 1,700 hours preparing their case. (h/t The Smoking Gun) $800,000, and 1,700 hours — for a case where the research was all done by the Smoking Gun before the suit was filed, and the only thing the lawyers had to do was create enough of a nuisance to induce Random House to settle.

For those of you scoring at home, assuming a $15 refund for each claimant, that would be a total recovery of approximately $24,000 for the class members. And $800,000 for the lawyers. Or, in other words, about 3% of the recovery for the consumers, and 97% for the lawyers. Ain’t America grand?

{ 4 comments }

1 Deoxy 10.02.07 at 10:18 am

ARG!

Sadly, I, too, predicted this, but I honestly HOPED to be wrong, that suing someone to force them to do something THEY HAD ALREADY DONE would not b profitable, but alass, the lawyers have just as tight a stranglehold on us as I expected.

They might save time by just resorting to actual robbery. The morality of it is the same.

2 wavemaker 10.02.07 at 1:20 pm

Jeez, sounds like a bargain compared to the securities fraud class actions. I got a check once for $4.79 and the attorneys got $33 million.

3 billb 10.02.07 at 6:54 pm

Sounds like we ought to limit class action attorneys’ fees by the percentage of class members that avail themselves of a settlement. Being generous, I’d give the plaintiffs’ attorneys a factor of two. I.e., if 50% of the class takes the settlement, they can have their full fee, otherwise they lose out proportionately (and, no, they’re not entitled to a bonus for more the 50% participation). Costs of notifying class members, beyond a first-class letter, single email, and website, to be borne by the plaintiffs at their discretion.

4 nevins 10.03.07 at 8:48 pm

The ‘plaintiffs’ got 3%? Their lawyers must have been feeling generous that day.

[DMN: not yet; that's what the lawyers are requesting.]

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