Damages: $0 settlement; Attorneys’ fees: $9.5 million

by Ted Frank on January 16, 2008

The lead plaintiff had claimed losses of $25 million, but settled for zero plus some corporate-governance changes that, as a Rutgers professor notes, probably would have happened anyway. But a settlement approved by a New Jersey federal judge in a shareholder suit against Schering-Plough awarded $9.5 million in attorneys’ fees, even applying a multiplier to lodestar hourly rates. [New Jersey Law Journal/law.com; In re Schering-Plough Corp. Securities Litigation, Case No. 2:01cv829 (D.N.J.)] Paying for those fees: shareholders, who also paid for what were likely multi-million dollar defense costs of litigation. Judge Katharine Sweeney Hayden, when certifying a single class in 2003, rejected arguments that there was an inherent conflict between class members that had already sold their stock and class members who continued to hold stock; she was appointed by Clinton in 1997.

{ 4 comments }

1 jtk 01.16.08 at 9:05 am

The judge cites a 350% increase in compliance spending as a justification for increasing lawyers fees. Just because they are spending more does not mean there is a net benefit to shareholders. It’s too bad the suit went after the directors personally forcing them to settle rather than risk losing their own assets. Shareholders are again the “winner” and the loser in this case.

2 BarSinister 01.16.08 at 11:15 am

I just received a notice of a class action settlement against Countrywide. It provides qualified class members with the princely sum of $16.00, with the lead plaintiffs getting $5000. each. Attorneys get $300,000 for expenses and $1600,000 in fees. Lovely.

3 Legal Reform Is Critical 01.16.08 at 12:40 pm

The amount of deadweight loss inflicted on the economy by the legal system is truly astounding. Every time Congress and the state and local legislatures pass a new set of rules and regulations, for example, the amount spent on legal work skyrockets.

However, in response to BarSinister, not all class actions are economically inefficient, regardless of how “unfair” it may appear that class members receive only a little whereas the lawyers receive a lot. There is a large literature on this subject.

The bottom line is that if numerous small claims (say, a company ripping off hundreds of thousands of customers by a few dollars each)cannot be aggregated, then these claims probably will go unremedied. Is this better? It costs a lot of money to bring these lawsuits, so of course the lawyers are going to be well compensated.

4 nevins 01.16.08 at 7:41 pm

The lawyer representing himself in a case like this would have a fool for a client, but the client would have one hell of a shyster lawyer.

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