A federal judge in Houston has awarded legal fees totaling $40.7 million to 300 lawyers from 55 firms who won a six-year, price-fixing class-action lawsuit against manufacturers of cardboard boxes.
"The efficiency with which this case was handled is remarkable compared with other complex antitrust cases," U.S. District Court Judge John V. Singleton wrote in rejecting a petition by 33 of the lawyers' larger clients to hold fees to $15 million.
The fee dispute had been closely watched in legal circles, where there have been allegations that lawyers for class-action plaintiffs pad hours and perform "makework," knowing that no single client in a large class action has sufficient economic interest in the case to ride herd on the attorneys' fees.
Earlier this year, in another major class-action case, the Fine Paper antitrust litigation, a Philadelphia federal judge allowed $4.3 million of the $20.3 million in fees that plaintiffs' lawyers had sought. He said the lawyers did extensive duplicative work and that they handed out work to one another on a "patronage" basis.
But in the Corrugated Container litigation in Houston, "the judge gave us a clean bill of health," said Stephen Susman, chairman of the plaintiff lawyer's steering committee.
Singleton awarded the lawyers roughly 80 percent of the $51 million they had sought.
"That batting average is pretty high for cases like this," said Susman, 42, who will receive $3.2 million in fees and whose firm will draw $7.2 million.
Susman led a team of lawyers who won settlements totaling $550 million ($365 million in settlements and the remainder in interest that has accrued) from 37 cardboard box manufacturers who allegedly conspired to fix prices. It was the largest settlement figure in the history of class-action antitrust litigation.
A spokesman for the Dallas firm of Rain, Harrell, Emery, Young & Doke, which had filed a 1,000-page objection to the fee requests on behalf of such winning class-action plaintiffs as General Motors Corp. and Beatrice Food Co., said today he was not sure they would appeal.
Despite his pleasure with the decision, Susman called the system of compensating plaintiffs' lawyers in such cases "insane" and "a disaster for economic efficiency."
In the 'lodestar-multiplier' system, as it is known in the bar, plaintiffs' lawyers give the presiding judge a tally sheet of the hours they worked on the class-action case. They also apply for a 'multiplier' of their normal hourly rates to compensate them for risk (if a plaintiffs' lawyer loses, he gets no fees) and for delays, usually running several years, in receiving payment.
Susman asked for a multiplier of 5 and was awarded a multiplier of 4, meaning that he will be paid up to $1,000 an hour for his work. Other lawyers received multipliers ranging from 2.5 to 3.5. The objecting clients had called for multipliers ranging from 1 to 2.2.
One of the sidelights of the Corrugated case was that it triggered a lobbying effort in Congress in 1981 and 1982 to amend antitrust laws in a way that would have reduced dramatically the potential liability of the Mead Corp., one of the 37 co-defendants.
Despite lobbying by former attorneys general Griffin Bell and Benjamin R. Civiletti, the Mead bill did not pass. But the possibility that such legislation might be enacted enabled Mead to settle with Susman for $45 million, a fraction of the potential $800 million liability it faced.