How Fees Are Set

The driving force behind class actions is lawyers' fees. Even so, there is no reliable record of the contingency fees that class action lawyers have garnered. Federal court filings and settlements are usually published, but most class actions have been filed in state courts where a record of decisions is not readily available. One study of a selected sample of 1,120 class actions in the period 1973–2003 found that fees in common-fund class actions totaled $7.6 billion. Another study of all class action settlements approved by federal judges in 2006–2007 indicated that the announced value of the settlements totaled $33 billion and that judges awarded nearly $5 billion in fees and expenses in these cases to the class action lawyers. I estimate that over the past thirty-five years, federal and state courts have awarded class action lawyers well in excess of $50 billion. This estimation does not include the fees generated by the states' suits against the tobacco companies, which were functional equivalents of class actions, brought mostly by state attorneys general in partnership with private contingency fee lawyers. When the suits were settled for $246 billion, the fees for the private lawyers – more than $15 billion payable over a twenty-five-year period – were so enormous that the private lawyers and the attorneys general, fearing a political uproar, sought to keep the fees from public view by creating a secret arbitration process to which the public was denied access.