In 2003, lawyers representing a class of five million merchants in antitrust class action litigation against Visa and MasterCard asked U.S. District Judge John Gleeson for $609 million in fees. They told the judge that they’d litigated all the way to jury selection in a case so vigorously defended that they’d had to oppose certiorari at the U.S. Supreme Court, and they’d achieved historic results: a $3 billion settlement fund for class members – at the time, the largest-ever recovery for Sherman Act violations – and injunctive relief that added billions more to the overall value of the deal. Their fee request represented 18 percent of the present-day cash value of the settlement fund and 9.7 times the lodestar value of their billings, but only about 2 percent of what they estimated to be the total value of the deal.
Judge Gleeson was having none of it. In a December 2003 opinion, he called the initial fee request “excessive,” “absurd” and “fundamentally unreasonable.” Gleeson instead awarded $220.3 million – about 6.5 percent of the settlement fund and a lodestar multiplier of 3.5. The judge said he considered that fee to be “generous,” and was only willing to award such an extraordinary amount of money because class counsel, led by the firm now known as Constantine Cannon, had obtained extraordinary results in a high-risk case.
I’m bringing you this little history lesson to inform your consideration of the request for $720 million in fees filed Friday with Gleeson by Robins, Kaplan, Miller & Ciresi; Berger Montague; and Robbins Geller Rudman & Dowd. The three firms are class counsel in another merchants’ antitrust class action against Visa and MasterCard, this one involving transaction processing “swipe fees” charged by the credit card companies. Like their predecessors in the 2003 case, which involved supposedly improper linkage of debit and credit cards, the swipe fee class lawyers have obtained a record cash settlement, $7.25 billion, and valuable, industrywide injunctive relief. (I should note that the controversial deal has not yet received final approval. Class lawyers filed a separate motion for approval on the same day as the fee request.) Plaintiffs’ lawyers in the swipe fee case argue that their unprecedented results, coupled with the nearly 500,000 hours expended by the 40 plaintiffs’ firms that worked on the case and would share in the fees, justify the outsize award.
The requested fees are more than plaintiffs’ lawyers received in the $7.2 billion Enron securities class action and the $7.8 billion BP settlement of the Deepwater Horizon oil spill case. Class counsel in the Enron case, which was arguably less risky than the swipe fee litigation and consumed fewer hours of lawyer time, were awarded $688 million, or about 9.5 percent of the class’s cash recovery. BP plaintiffs’ lawyers are slated to get $600 million. But according to a report by plaintiffs’ fee expert Charles Silver of the University of Texas School of Law, those numbers indicate that the swipe fee lawyers’ request is in line with fees in other megacases. My Reuters colleague Andrew Longstreth reported that class counsel in the $3 billion Tyco securities class action were awarded $464 million, which is more than the 10 percent requested in the swipe fee case.
Clearly, Robins Kaplan, Berger & Montague and Robbins Geller learned from Gleeson’s opinion in the previous credit card litigation. Their request for 10 percent of the cash value of the deal is notably less than the 18 percent requested by class counsel in the 2003 case, and the multiplier on their $161.7 million in lodestar fees is 4.5, rather than the 9.7 multiplier originally requested in the 2003 settlement. The swipe fee lawyers based their lodestar fees on an average hourly rate of $360, which encompasses fee rates over the nine years of the case, rather than relying on an average rate for 2012. If they had used current rates instead of historical rates, their lodestar multiplier would have been under 4 and closer to the 3.5 multiplier Gleeson calculated in the 2003 award, which was based on class counsel’s then current rates. Plaintiffs’ lawyers in the swipe fee case also provided Gleeson with a detailed breakdown of audited hourly billings and expenses from all of the firms in the litigation, as well as explanations from class counsel of the hard work that produced their record recovery. Considerable thought and effort went into this fee request.