It’s a self-evident truth that if contingency fee lawyers don’t see value in a case, they won’t bring it. With that in mind, I’ve often wondered whether class action defendants should be more vociferous about big fee requests by class counsel. I know what you’re thinking: Plaintiffs lawyers won’t agree to settle unless defense counsel pledge not to oppose their fee request. And realistically, defendants’ main concern is making a case go away as cheaply as possible. How settlement money is divided between class members and their lawyers is, for defendants, a secondary issue, at best. If objecting to class counsel’s fee request will prevent a deal from going through, most defendants won’t object.
That’s short-term thinking, though. Contingency fee lawyers are perhaps the most rational economic actors in the legal business. The best way to curtail nuisance litigation is to make it economically unattractive. And one way to do that – even in cases in which the size of the class and the potential of statutory damages makes settlement unavoidable – is for defendants to argue for minimal class counsel fees.
That’s what Facebook and its lawyers at Cooley did in the Sponsored Stories class action that was approved Monday by U.S. District Judge Richard Seeborg of San Francisco. As you probably recall, this case, which involves Facebook’s supposed misappropriation of users’ names and profile photos in sponsored advertising, has something of a tortured history. Faced with the potential of $750 per class member in statutory damages to a class numbering as many as 100 million Facebook users, the company agreed to a $20 million cy pres settlement in 2012, of which $10 million was to go to class counsel from The Arns Law Firm and Jonathan Jaffe Law. Judge Seeborg rejected the deal, questioning why plaintiffs’ lawyers were slated to recover so much when class members were to receive no individual compensation.
In that first proposed deal, Facebook had agreed not to oppose class counsel’s fee request. But when the two sides presented Seeborg with a revised settlement last November, that provision was out. Cash payments, meanwhile, were in: up to $10 to each class member, depending on how many filed claims. After Seeborg gave preliminary approval to the revised $20 million deal in November, about 600,000 claims were filed. Because that was a relatively low number, Facebook agreed to raise individual payments to $15. (Fourteen consumer and Internet education charities will share millions more in unclaimed funds.)
Facebook also agreed to make changes in its Sponsored Stories program, disclosing when and how users’ information is republished and giving them control over that use. When it came time to request fees, class counsel asserted that the injunctive relief it obtained from Facebook was worth between $57.4 million and $226 million to the class. So even though they asked for $7.5 million – 37.5 percent of the $20 million in cash in the settlement fund – they argued that the fee request actually amounted to less than 10 percent of the entire value of the settlement, even at the low end of their evaluation of the injunctive relief.