How do you get a group of lawyers to smile for a photo?
Have them say, “Fees!”

Oh, those “great” lawyer jokes. More often than not, they involve the idea that a lawyer cares more about money than anything else. A lot of the time, these jokes could apply to most other professions. But if the judge in a case you’re handling starts off with a lawyer joke, it’s probably not a good sign you’re getting the attorneys’ fees you asked for.

This happened recently in a federal district court in Texas. It involved a fee multiplier in a common-fund case. But before we get to the case itself, let’s review the rationale for fee multipliers and what a common fund case is.

Fee Multipliers in Common-Fund Cases

The concept of a fee multiplier is straightforward: it allows attorneys to receive a percentage increase over their standard fees to reward exceptional performance or to account for the risk undertaken by representing a class on a contingency basis.

For example, a 1.5 multiplier would mean attorneys receive 150% of their standard hourly fees. However, the application and justification of these multipliers can be controversial.

The common fund doctrine, meanwhile, typically determines how plaintiffs are paid in personal injury cases and class action lawsuits. In common fund cases, the defendant agrees on a settlement amount which is used to pay for everything. This includes the plaintiffs’ claims, attorneys’ fees, administrative costs, and everything else. This is not always a bad thing for plaintiffs.

For example, it often prevents insurance companies from taking the full amount they are owed for medical expenses not covered by insurance. And like all contingency fee arrangements, it allows plaintiffs to obtain counsel without paying any upfront costs.

But, when courts apply a multiplier to attorney’s fees in common-fund cases, the additional money awarded to the attorneys effectively reduces the portion of the settlement available to the plaintiffs. This creates a direct financial conflict between the attorneys’ gain and the plaintiffs’ recovery.

Ankle-Shaking Behavior?

The United States District Court for the Northern District of Texas didn’t mince words in a recent decision regarding fee multipliers in a class action lawsuit involving a common fund.

The attorneys for the plaintiffs requested a 1.9 multiplier on their fees, which would mean an additional 90% on top of their standard charges. Judge Brantley Starr, in denying the motion to obtain a fee multiplier, referenced an episode of The Simpsons, where a lawyer says, “Legally, I am allowed to shake him by the ankles and see what falls out. It’s established in the case of Lawyers v. Justice.”

Judge Starr has been known to make life hard for lawyers who disagree with him, once forcing three Southwest Airlines lawyers to attend “religious-liberty training” by a Christian legal group of his choice when they did not do enough to comply with his order.

Judge Starr also noted that although fee multipliers are rarely contested by the defendant (because what do they care what happens to the money once they don’t have it anymore), the Supreme Court has given guidance to district courts on the reasonableness of attorney’s fees and fee multipliers in class action lawsuits. These are the Johnson test and the Lodestar test. The Johnson test uses 12 factors to determine the reasonableness of attorneys’ fees.

Judge Starr was quite clear in his preference for the Lodestar test, but after analyzing Fifth Circuit precedent, he reluctantly concluded that “all roads sadly lead to Johnson.” However, even after applying the Johnson test, he found that the Lodestar amount was accurate under both tests (go figure).

Long story short, the attorneys did not get the 30% of the $33 million award they were seeking. Instead, they ended up with about $5 million.

At least they don’t have to attend any mandatory training.

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