Study Will Be Published In Upcoming 2015 Edition of Columbia Law Review.
Law professors Lynn Baker, Charles Silver, and Michael Perino will soon be publishing an article, “Is The Price Right?: An Empirical Study Of Fee-Shifting In Securities Class Actions,” in an upcoming edition of the Columbia Law Review. The article is based on an empirical study of 424 federal securities class action settlements in district courts over the 2007-2012 time frame. Here is a summary of their findings:
1. Awarded fees are lower and fee cuts more likely in district courts seeing a high volume of securities cases (however, smaller fee awards only occurred in 14.62% of cases, meaning class counsel’s requests were usually honored);
2. Fee percentages actually awarded did decline more steeply for large settlements reached in cases filed in high volume districts;
3. District courts cut fee requests based on predilections rather than the merits of the fee requests (for example, in 40.32% of “fee cut” cases, district courts did so only because the requests were “too large”);
4. The lodestar “cross-check” on the percentage of recovery methodology accomplished little or nothing, with a pure percentage of fund approach dominating (with the authors suggesting the lodestar check may be a waste of time).
The authors do propose a solution to the whole fee recovery process: class counsel should upfront negotiate a fee agreement that should be reviewed and then blessed or not blessed by the district court (an ex ante approach).